When is a contract inviolate and when isn't it?

It is hard not to be disappointed with the new President these days when it comes to managing the crisis in the credit markets and in industrial policy (not that we have an "industrial policy, but that is a rant for another day). Note the contrast between the tough stance taken with what remains of Chrysler and GM, found here
http://www.nytimes.com/2009/04/01/business/01auto.html?_r=1&hp
and letting the departing chief executive of GM walk away with millions, detailed here
http://blogs.bnet.com/secdocuments/?p=103
Forcing the automakers into bankruptcy might result in mass immiseration among those who labored for decades to fund their retirements. Meanwhile, although they forced Rick Wagoner out, they are allowing him to keep all he acquired while he ran GM into the ground. When are we going to get away from "Geithnerism", as the Nation calls it, the belief that it is okay to have the elite be rewarded and coddled regardless of their performance while those who shower at night are expendable even if they perform well? Sure we need experts to manage things at the highest levels, but they don't have to be so obscenely compensated. Will this ever be straightened out before injustice fatigue sets in?

Merrill Lynch Bonus Payments Dwarf AIGs

The political firestorm over the $165 million bonuses to executives at the failed American International Group (A.I.G.) that ripped through Washington, DC, in mid-March could be reignited by further attention on failing financial companies who were given taxpayer dollars then turned around and spent the cash on bonuses.

Anger over the bonuses at A.I.G. blew back onto members of the Obama administration as it was revealed that Treasury Secretary Tim Geithner and others had been aware of the bonus payments but failed to halt them and did not express "outrage," until the bonus checks were already cashed. Further revelations of backroom dealings and million-dollar bonuses threaten to make any kind of assistance to financial institutions politically impossible for Congress.

(For the remainder of this article click on: http://www.truthout.org/033109J )

MORE ON THE G20...

And here is the FT's interview with John Geithner...

http://www.ft.com/cms/s/0/86ab7a64-1d65-11de-9eb3-00144feabdc0.html

BEFORE THE G20 MEETING...

Here is an interview Obama gave to the FT on March 30. I thought it would be interesting for us to consider his views about the global context. You can read the piece and/or listen to the recording of the interview.

http://www.ft.com/cms/s/0/74ab7ed2-1c8d-11de-977c-00144feabdc0.html

Dueling videos: Obama and Gregg deliver weekly addresses

President Obama and his former Commerce Secretary nominee go head to head this morning in Saturday morning’s Battle of the Videos.

Although it sounds like something from Headbanger’s Ball, it’s just the preferred format now to try to make news on the one neglected day of the week where politics don’t reign supreme.

Obama

In his weekly address, the president discussed efforts underway from the federal government to assist citizens of the upper Midwest who are dealing with rising flood waters. He said the Department of Homeland Security and FEMA are coordinating the response with many other government agencies on location to assist.

“The U.S. Army Corps of Engineers is assisting in the emergency construction of levees,” he said. “The Coast Guard is aiding in search and rescue efforts while the Department of Defense is helping to move people and supplies. Members of the National Guard have been activated and are on the scene as well.”

(for remainder of article and videos see: http://features.csmonitor.com/politics/2009/03/28/dueling-videos-obama-and-gregg-deliver-weekly-addresses/

Obama "Heartbroken" Over Homelessness

Tonight, President Obama directly addressed the growing homelessness crisis during a prime time press conference, saying he's "heartbroken" that any child is without a roof over their heads. In a bold and noteworthy move, he also called for a shift in the national perception of homelessness and an overhaul of our embedded judgments and beliefs.

Do I sense change in the air?

Reporter Kevin Chappelle of Ebony posed this question:

A recent report found that, as a result of the economic downturn, 1 in 50 children are now homeless in America. With shelters at full capacity, tent cities are sprouting up across the country.

In passing your stimulus package, you said that help was on the way. But what would you say to these families, especially children, who are sleeping under bridges and in tents across the country?

And here is President Obama's answer:

Well, the first thing I'd say is that I'm heartbroken that any child in America is homeless. And the most important thing that I can do on their behalf is to make sure their parents have a job. And that's why the recovery package said, as a first priority, how are we going to save or create 3.5 million jobs?

(For remainder of article see:

http://homelessness.change.org/blog/view/obama_heartbroken_over_homelessness

The Republican Alternative Stimulus Plan

by David Michael Green (Commondreams.org)

I'm kinda pissed off at the lousy treatment America is giving to Republicans these days.

First of all, in a general sense, it just seems ungrateful and ungracious. I mean, Republicans worked hard this last decade to make America what it is today. We wouldn't have the foreign relations we do, or the war situations, or the environmental condition, or the fiscal situation or any of that stuff if the GOP hadn't been on the job all these years.

And we wouldn't have this economy, either. Can't Americans show a little respect and gratitude where it is due?

The particular thing that sticks in my craw of late is the reckless allegation that Republicans are just the Party of No, and that they have no plans of their own to help revive the American economy. Nothing could be further from the truth. Or, at least, that's what Rush told me. And I believe it.

In fact, the truth is that the GOP has a very sophisticated, very elaborate, 11-point plan for rescuing the country from the economic abyss. And, while the liberal media may be working overtime to make sure you never hear about it, I'm glad to set you straight.

Here goes:

1. TALK A LOT ABOUT FISCAL RESPONSIBILITY. We all know that marketing perceptions are more important than actual realities, and nowhere more so than in this domain. Forget about what anyone actually does. Just remember that the Democrats are always "tax-and-spend liberals", and the GOP is the "party of fiscal responsibility". Say it over and over. Pretty soon you'll believe it, and others will too.

(for remainder of article see Comment below:)

Obamanomics Isn't About Big Government

The president's focus is on improving human capital.
Robert Reich - Wall Street Journal

Twenty-eight years ago, Ronald Reagan used the severe economic downturn of 1980-82 to implement an economic philosophy that not only gave force and meaning to a wide range of initiatives but also offered a way back to sustained economic growth. Is there a similarly powerful animating idea behind Obamanomics?

The expansive and expensive forays of the Treasury and the Federal Reserve Board into Wall Street notwithstanding, President Barack Obama's 10-year budget (whose projections may prove wildly optimistic if the economy fails to rebound by early next year) presents a remarkably conservative picture. In 10 years, taxes are expected to fall to around 19% of GDP, a lower level than the late 1990s. Spending is expected to drop to around 22.5% of GDP, about where it was under Ronald Reagan -- including nondefense discretionary spending at about 3.6% of GDP, its lowest since data on this were first collected in 1962.

The real distinction between Obamanomics and Reaganomics involves government's role in achieving growth and broad-based prosperity. The animating idea of Reaganomics was that the economy grows best from the top down. Lower taxes on the wealthy prompts them to work harder and invest more. When they do so, everyone benefits. Neither Reagan nor the apostles of supply-side economics explicitly promised that such benefits would "trickle down" to everyone else but this was broadly understood to be the justification.

(See remainder of article in Comments below:)

Obama to Bankers: "Show Some Restraint"

"No frills" is right. At the meeting Friday at the White House between President Barack Obama and 15 bankers representing the nation's most prominent financial institutions, the president offered his guests only water, the Wall Street Journal reports in its top story. While outlining a tenuous resolution reached by Wall Street and the White House—the Bankers did offer support for Obama's rescue plans, but are reportedly still irked by his "tough rhetoric" in recent weeks—the article offers juicy tidbits of what took place. "J.P. Morgan CEO James Dimon jokingly offered Treasury Secretary Timothy Geithner a check for $25 billion—the amount his bank owes the government. Camden Fine, head of the Independent Community Bankers of America, gave Mr. Obama a foam Ben Bernanke doll and suggested the president squeeze the Federal Reserve chairman during stressful moments," the paper says. Adding to that, Bloomberg quotes Fine, who said of the talks: "Clearly, the president said: 'Look you can help me by helping yourselves and moderating this behavior and bringing scale to this and making sense out of it so the administration doesn't have to step in.' "

(See remainder of article in comments below:)

Friday Extravaganza: Econ News (and background) and Garden Dreams

Dear Obama Group:

To make amends for missing my spot last Friday (not a good day for me), I am going to offer some background information on one of our central areas of interest as well as cover some worthy “breaking” news.

I’d like to begin by drawing your attention to the Bill Moyers interview with William Greider to be broadcast starting this evening. The topic of conversation is the state of the economy and what is to be done about it. Greider, the national affairs correspondent for the Nation, has been a perceptive critic of financialization for years; in conversation with Moyers, I expect pretty solid results. Here’s the teaser at Moyers’ site, with a link to find broadcast times depending on your preferred station.

There's some good news, potentially, regarding the single-payer health care option is the bill that Senator Bernie Sanders introduced yesterday. You can check out the details here, via one of the front-pagers on “Physicians for a National Health Program.” (This looks like a promising site to follow regarding this subject.)

Here in Michigan our lobbying task is clear, and not as easy as we might like. Recently, Senator Levin has given indications that he is casting his lot more definitely with the so-called “blue dogs” within the party. It is going to be important for us to keep as much pressure on both Levin and Stabenow to seize the moment and not shrink from the opportunity for fundamental transformation. Time for a New New Deal indeed.

One topic, especially at this time of year, unites all three of our issues: food production, or more modestly, gardening. (I am looking forward myself to planting a garden for the first time in over five years. Hooray for dirt, seeds, rain, and sunshine!) Does the White House garden truly presage development beyond the national obsession with “the lawn”? I, along with Ellen Goodman, sincerely hope it does.

Now for some background information.

I am excited to be having Tom Weisskopf come to our meeting on Sunday. (Thank you, whoever arranged for that!) He’s been a contributor to Dollars and Sense, a journal of progressive economics, for many years. I recommend that you take a look at some of his recent posts (last October) regarding his position on the emerging crisis if you have a chance. That site will also provide links for you to check out more on the subject by others affiliated with the journal.

For other analysis of the situation (which may or may not be compatible with Weisskopf’s; I confess I do not know enough to say yet), I recommend taking a look at this new article by Simon Johnson, based in part on his direct experience as the chief economist at the IMF. From what I’ve gleaned so far, Johnson’s position is pretty close to Greider’s—at least in terms of causal factors and core problems. I am not sure yet whether they agree on the best remedies. Johnson has been a featured commentator at talkingpointsmemo for the last few weeks, and he seems to have a well-founded argument.

Lastly, as we probably all know, the unemployment rate in Michigan is now officially the worst in the country. I expect to be part of that number, officially, sometime during the summer since I learned last Friday that my teaching contract won’t be renewed for the fall. On the one hand, that will give me more organizing time; on the other—well, you know. So, please keep a good thought for me over the next while, if you don’t mind!

Paul Krugman on Obama's bank plan: heads the banks win, tails the public loses.

Original article

"... 85 percent of the money is going to be a loan from the government, which is a non-recourse loan, which means that it’s backed only by the assets that these guys are buying, which means that if the thing loses more than 15 percent of its value, which is highly, you know, possible, given how uncertain these things are worth, then the investors, the private investors, just walk away. So there’s—exactly, it’s a heads I win, tails you lose. If the stuff—you buy something at $100 and it goes up to $150, you make $50. You buy it at $100 and it goes down to $50, then you only lose $15, because the other $35 gets even by the taxpayer."

The Federal Deposit Insurance Corporation (FDIC) could do it.

"... the FDIC guarantees a bank’s debts, basically, so the deposits are secure, and then if it says the bank is bankrupt, then it goes in and it seizes the bank and then sells the toxic stuff for whatever it can get. That’s what I advocate; that’s what we ought to be doing. ... they’re just daunted by the scale of this thing. The FDIC normally does ... two or three banks a week, even in bad times, and they’re small banks. Here we’re talking about quite possibly Citigroup, which is $2 trillion in assets."

Has a ‘Katrina Moment’ Arrived?

(The links don't work if you publish the text in the comment.)

March 22, 2009

By Frank Rich, New York Times

A CHARMING visit with Jay Leno won’t fix it. A 90 percent tax on bankers’ bonuses won’t fix it. Firing Timothy Geithner won’t fix it. Unless and until Barack Obama addresses the full depth of Americans’ anger with his full arsenal of policy smarts and political gifts, his presidency and, worse, our economy will be paralyzed. It would be foolish to dismiss as hyperbole the stark warning delivered by Paulette Altmaier of Cupertino, Calif., in a letter to the editor published by The Times last week: “President Obama may not realize it yet, but his Katrina moment has arrived.”

Six weeks ago I wrote in this space that the country’s surge of populist rage could devour the president’s best-laid plans, including the essential Act II of the bank rescue, if he didn’t get in front of it. The occasion then was the Tom Daschle firestorm. The White House seemed utterly blindsided by the public’s revulsion at the moneyed insiders’ culture illuminated by Daschle’s post-Senate career. Yet last week’s events suggest that the administration learned nothing from that brush with disaster.

Otherwise it never would have used Lawrence Summers, the chief economic adviser, as a messenger just as the A.I.G. rage was reaching a full boil last weekend. Summers is so tone-deaf that he makes Geithner seem like Bobby Kennedy.

Bob Schieffer of CBS asked Summers the simple question that has haunted the American public since the bailouts began last fall: “Do you know, Dr. Summers, what the banks have done with all of this money that has been funneled to them through these bailouts?” What followed was a monologue of evasion that, translated into English, amounted to: Not really, but you little folk needn’t worry about it.

Yet even as Summers spoke, A.I.G. was belatedly confirming what he would not. It has, in essence, been laundering its $170 billion in taxpayers’ money by paying off its reckless partners in gambling and greed, from Goldman Sachs and Citigroup on Wall Street to Société Générale and Deutsche Bank abroad.

Summers was even more highhanded in addressing the “retention bonuses” handed to the very employees who brokered all those bad bets. After reciting the requisite outrage talking point, he delivered a patronizing lecture to viewers of ABC’s “This Week” on how our “tradition of upholding law” made it impossible to abrogate the bonus agreements. It never occurred to Summers that Americans might know that contracts are renegotiated all the time — most conspicuously of late by the United Automobile Workers, which consented to givebacks as its contribution to the Detroit bailout plan. Nor did he note, for all his supposed reverence for the law, that the A.I.G. unit being rewarded with these bonuses is now under legal investigation by British and American authorities.

Within 24 hours, Summers’s stand was discarded by Obama, who tardily (and impotently) vowed to “pursue every single legal avenue” to block the bonuses. The question is not just why the White House was the last to learn about bonuses that Democratic congressmen had sought hearings about back in December, but why it was so slow to realize that the public’s anger couldn’t be sated by Summers’s legalese or by constant reiteration of the word outrage. By the time Obama acted, even the G.O.P. leader Mitch McConnell was ahead of him in full (if hypocritical) fulmination.

David Axelrod tried to rationalize the lagging response when he told The Washington Post last week that “people are not sitting around their kitchen tables thinking about A.I.G.,” but are instead “thinking about their own jobs.” While that’s technically true, it misses the point. Of course most Americans don’t know how A.I.G. brought the world’s financial system to near-ruin or what credit-default swaps are. They may not even know what A.I.G. stands for. But Americans do make the connection between their fears about their own jobs and their broad understanding of the A.I.G. debacle.

They know that the corporate bosses who may yet lay them off have sometimes been as obscenely overcompensated for failure as Wall Street’s bonus babies. As The Wall Street Journal reported last week, chief executives at businesses as diverse as Texas Instruments and the home builder Hovnanian Enterprises have received millions in bonuses even as their companies’ shares have lost more than half their value.

Since Americans get the big picture of this inequitable system, that grotesque reality dwarfs any fine print. That’s why it doesn’t matter that the disputed bonuses at A.I.G. amount to less than one-tenth of one percent of its bailout. Or that CNBC — with 300,000 viewers on a typical day by Nielsen’s measure — is a relatively minor player in the crash. Or that Edward Liddy had nothing to do with A.I.G.’s collapse, or that John Thain, of the celebrated trash can, arrived after, not before, others wrecked Merrill Lynch.

These prominent players are just the handiest camera-ready triggers for the larger rage. Passions are now so hot that even Bernie Madoff’s crimes began to pale as we turned our attention to A.I.G.’s misdeeds, just as A.I.G. will fade when the next malefactor surfaces.

What made Jon Stewart’s takedown of Jim Cramer resonate was less his specific brief against CNBC’s cheerleading for bad stocks than his larger indictment of the gaping economic inequality that defined the bubble. As Stewart said, there were “two markets” — the long-term market that Americans earnestly thought would sustain their 401(k)’s, and the fast-moving, short-term “real market” in the back room where high-rolling insiders wagered “giant piles of money” and brought down everyone with them.

No one is more commanding on this subject than our president. In his town-hall meeting in Costa Mesa, Calif., on Wednesday, he described the A.I.G. bonuses as merely a symptom of “a culture where people made enormous sums of money taking irresponsible risks that have now put the entire economy at risk.” But rhetoric won’t tamp down the anger out there, and neither will calculated displays of presidential “outrage.” We must have governance to match the message.

To get ahead of the anger, Obama must do what he has repeatedly promised but not always done: make everything about his economic policies transparent and hold every player accountable. His administration must start actually answering the questions that officials like Geithner and Summers routinely duck.

Inquiring Americans have the right to know why it took six months for us to learn (some of) what A.I.G. did with our money. We need to understand why some of that money was used to bail out foreign banks. And why Goldman, which declared that its potential losses with A.I.G. were “immaterial,” nonetheless got the largest-known A.I.G. handout of taxpayers’ cash ($12.9 billion) while also receiving a TARP bailout. We need to be told why retention bonuses went to some 50 bankers who not only were in the toxic A.I.G. unit but who left despite the “retention” jackpots. We must be told why taxpayers have so little control of the bailed-out financial institutions that we now own some or most of. And where are the M.R.I.’s from those “stress tests” the Treasury Department is giving those banks?

That’s just a short list. In general, it’s hard to imagine taxpayers shelling out billions for a second bank bailout unless there’s a full accounting of every dime of the first, and true transparency for the new plan whose rollout is becoming the most attenuated striptease since the heyday of Gypsy Rose Lee.

Another compelling question connects all of the above: why has there been so little transparency and so much evasiveness so far? The answer, I fear, is that too many of the administration’s officials are too marinated in the insiders’ culture to police it, reform it or own up to their own past complicity with it.

The “dirty little secret,” Obama told Leno on Thursday, is that “most of the stuff that got us into trouble was perfectly legal.” An even dirtier secret is that a prime mover in keeping that stuff legal was Summers, who helped torpedo the regulation of derivatives while in the Clinton administration. His mentor Robert Rubin, no less, wrote in his 2003 memoir that Summers underestimated how the risk of derivatives might multiply “under extraordinary circumstances.”

Given that Summers worked for a secretive hedge fund, D. E. Shaw, after he was pushed out of Harvard’s presidency at the bubble’s height, you have to wonder how he can now sell the administration’s plan for buying up toxic assets with the help of hedge funds. It will look like another giveaway to his own insiders’ club. As for Geithner, people might take him more seriously if he gave a credible account of why, while at the New York Fed, he and the Goldman alumnus Hank Paulson let Lehman Brothers fail but saved the Goldman-trading ally A.I.G.

As the nation’s anger rose last week, the president took responsibility for what’s happening on his watch — more than he needed to, given the disaster he inherited. But in the credit mess, action must match words. To fall short would be to deliver us into the catastrophic hands of a Republican opposition whose only known economic program is to reject job-creating stimulus spending and root for Obama and, by extension, the country to fail. With all due deference to Ponzi schemers from Madoff to A.I.G., this would be the biggest outrage of them all.

Ann Arbor News to close in July 2009.

The Ann Arbor News will cease publication in July. A new company, AnnArbor.com, will be launched at that time.

The Ann Arbor News will close in July after publishing as the city's daily newspaper since 1835, publisher Laurel Champion announced today.

Heavy losses in revenue drove the decision. Champion said the current "business model is not sustainable." Advertising revenue slumped more than 20 percent in January compared to the same month last year.

(The whole article is the first comment.)

Obama Releasing "Ugly" Bush Admin Torture Memos

Over objections from the U.S. intelligence community, the White House is moving to declassify--and publicly release--three internal memos that will lay out, for the first time, details of the "enhanced" interrogation techniques approved by the Bush administration for use against "high value" Qaeda detainees. The memos, written by Justice Department lawyers in May 2005, provide the legal rationale for waterboarding, head slapping and other rough tactics used by the CIA. One senior Obama official, who like others interviewed for this story requested anonymity because of the issue's sensitivity, said the memos were "ugly" and could embarrass the CIA. Other officials predicted they would fuel demands for a "truth commission" on torture.

http://www.newsweek.com/id/190362

Follow the Bailout Cash... (read Campaign $$$)

There was plenty of outrage on Capitol Hill last week over the executive bonuses paid out by AIG after getting federal bailout money. But another money trail could make voters just as angry: the campaign dollars to members of Congress from banks and firms that have received billions via the Troubled Asset Relief Program. While a few big firms, such as Wells Fargo and JP Morgan Chase, have curtailed their campaign giving, others are quietly doling out cash to select members of Congress, particularly those who serve on committees that oversee TARP. In recent filings with the Federal Election Commission, the political action committee for Bank of America (which got $15 billion in bailout money) sent out $24,500 in the first two months of 2009, including $1,500 to House Majority Leader Steny Hoyer and another $15,000 to members of the House and Senate banking panels. Citigroup ($25 billion) dished out $29,620, including $2,500 to House GOPWhip Eric Cantor, who also got $10,000 from UBS which, while not a TARP recipient, got $5 billion in bailout funds as an AIG "counterparty." "This certainly appears to be a case of TARP funds being recycled into campaign contributions," says Brett Kappell, a D.C. lawyer who tracks donations. (A spokesman for Cantor did not respond to requests for comment. A spokeswoman for Hoyer said it's his "policy to accept legal contributions.") The cash flow is already causing angst inside the Beltway. "The last thing I want to do is wake up one morning and see our PAC check being burned on C-Span," said one bank lobbyist, who asked not to be identified because of the issue's sensitivity. House Speaker Nancy Pelosi and House Financial Services chair Rep. Barney Frank both said recently they won't take donations from TARP recipients. But House Democratic fundraisers have quietly passed the word that the party's campaign committee will resume accepting them—but down the road, not right now. Said one fundraiser, who also requested anonymity, "These are treacherous waters."

http://www.newsweek.com/id/190363

Bloomberg: Obama "Deserves A Lot Of Credit" (VIDEO)

California Governor Arnold Schwarzenegger and New York City Mayor Michael Bloomberg praised President Obama's infrastructure plans on Sunday's "Meet the Press."

Obama "deserves a lot of credit for trying to do what he promised to do when he got elected," Bloomberg told host David Gregory. The president, he argued, was tackling long-standing problems in education, energy independence, health care, and more, instead of only worrying about the stimulus. He credited Obama with using the economic crisis to "galvanize Congress" and "galvanize the country" to get behind ambitious new projects.

(Watch the video and read the rest of the article at: http://www.huffingtonpost.com/2009/03/22/bloomberg-obama-deserves_n_177779.html

Treasury planning to announce new plans for troubled assets

The Baseline Scenario: according to The New York Times and the The Wall Street Journal, the Treasury Department is set to announce its plan for troubled assets early next week. It will include three components. The details aren’t clear since these are anticipatory news stories, but it will be something like this (combining bits of information from the two stories):

1. The FDIC will create a new entity to buy troubled loans, with the government contributing up to 80% of the capital and the remainder coming from the private sector. The Fed or the FDIC would then provide non-recourse loans* for up to 85% of the total funding (NYT), or guarantees against falling asset values (WSJ), which more or less amount to the same thing.
2. Treasury will create multiple new investment funds to buy troubled securities, with Treasury contributing 50% of the capital and the rest coming from the private sector. It’s not clear from the news stories, but I think it’s highly likely that these funds will also benefit from either non-recourse loans or asset guarantees.
3. The Term Asset-Backed Securities Loan Facility (TALF) is a program under which the Fed was already planning to buy up to $1 trillion of newly-issued, asset-backed securities** (backed by car loans, credit card receivables, mortgages, etc.). The idea was to stimulate new lending in these categories. This program will be expanded to allow the Fed to buy “legacy” assets - those issued prior to the crisis. This enables the Fed to buy toxic assets off of bank balance sheets.

(More in notes attached)

Obama reaches out to Iran with video message

WASHINGTON – President Barack Obama is reaching out to the Iranian people in a new video with Farsi subtitles, saying the U.S. is prepared to end years of strained relations if Tehran tones down its bellicose rhetoric.

The video released Friday was timed to the festival of Nowruz (no-ROOZ), which means "new day" and marks the arrival of spring. It's a major holiday in Iran.

"So in this season of new beginnings I would like to speak clearly to Iran's leaders," Obama said in the video. "We have serious differences that have grown over time. My administration is now committed to diplomacy that addresses the full range of issues before us, and to pursuing constructive ties among the United States, Iran and the international community."

http://news.yahoo.com/s/ap/20090320/ap_on_go_pr_wh/obama_iran

Got a question about the economy? Check this.

Marketplace Whiteboard has some good explanations of economic ideas like leverage and writedown, in video.

The link was broken. I've fixed it.

MORE NEWS FROM EUROPE

1. President Assad of Syria gave an interview to the Italian newspaper La Repubblica in which he opened the door to better diplomatic relations with the US. Here is a summary in English from Reuters.

http://www.reuters.com/article/topNews/idUSTRE52H2RK20090318

2. More on "the future of capitalism" from the Financial Times...

http://www.ft.com/cms/s/ae1104cc-f82e-11dd-aae8-000077b07658.htm?ftcamp=Late_headline1/NL/USMar2009/Cluster_2_foc/0/

3. An article by Jelasevic, Governor of the Central Bank of Serbia, which argues in favor of structural reforms in Balkan and Central European States, rather than a full-fledged bailout from the IMF and the EU

http://www.ft.com/cms/s/0/b8abe858-1268-11de-b816-0000779fd2ac.html

4. And for readers of French, an interesting take on how to address the crisis globally, focused on two main points (Le Monde):

1. international negotiations to establish exchange rates at the global level
2. establishing a pricing system for energy consumption different from the pricing system of other goods and services.

The article doesn't contain details, but there are suggestions for further reading, so we can try to understand better what the author has in mind.

http://www.lemonde.fr/opinions/article/2009/03/17/a-crise-structurelle-reponse-globale-par-pierre-calame_1169019_3232.html

5. I am printing belpw a comment on an obcure point Bernanke made, which seems to have been at least partially responsible for the rally on Wall Street. These analysts are always very bearish, but I can't say they have been off the target much since I've started reading them.

Eureka! The Banking Industry's ProblemsAre Solved! by Mike Larson
Dear Subscriber,
Who knew it would be so easy? Who knew we could solve the banking industry's collapse by simply changing how we account for assets. Eureka! Problem solved!
That seems to be the conclusion Wall Street came to earlier this week, judging by the reaction to Fed Chairman Ben Bernanke's comments at the Council on Foreign Relations on Tuesday. During that speech, Bernanke weighed in on "mark to market" accounting, saying the following:
"The ongoing move by those who set accounting standards toward requirements for improved disclosure and greater transparency is a positive development that deserves full support. However, determining appropriate valuation methods for illiquid or idiosyncratic assets can be very difficult, to put it mildly. Similarly, there is considerable uncertainty regarding the appropriate levels of loan loss reserves over the cycle.
"As a result, further review of accounting standards governing valuation and loss provisioning would be useful, and might result in modifications to the accounting rules that reduce their procyclical effects without compromising the goals of disclosure and transparency. Indeed, work is underway on these issues through the Financial Stability Forum, and the results of that work may prove useful for U.S. policymakers."
Fed Chairman Ben Bernanke's recent comments suggest "modifying" accounting rules might help the banking system.
What Bernanke did is shift ever so slightly toward the position of the banking industry's apologists. These lobbyists, assorted policymakers, and pundits (including folks like Steve Forbes, who wrote an Op-Ed in the Wall Street Journal the other day), are arguing — once you cut to the chase — the following ...
The problem with the banks isn't all the crappy securities and loans they're loaded up with.
It's not that they took on too much excessive risk, lending against assets whose value is plunging.
It's not that they funded asinine private equity deals, stupid commercial construction deals, and dumb home purchases.
It's that they have to mark their book of securities made up of these bundled loans to market. And they argue that the prices they could get for those securities in the markets are "artificially" low — or in some cases, that there is NO market for them.
If only they could avoid marking those assets to market, or use their super- duper net present value and cash flow MODELS — which, surprise, surprise, say the "real" value of those securities is higher — then the banking system would be fine. We could all go back to the wonderful world of yesteryear.


There's just one problem ...
Pretending Something's Worth More Than It Is Doesn't Change Reality!Look, the problem isn't that there's NO market for these bad securities. The problem isn't that the prices are "artificially" low. The problem isn't how we account for these assets. The problem is that the industry doesn't want to acknowledge that today's prices are the REAL prices.
There are tons of bidders out there for this crappy paper ... at the RIGHT price. Vulture funds, hedge funds, private equity investors: They're all raising billions and billions of dollars to scoop up cheap real estate, inexpensive bundles of mortgage backed securities, and distressed buyout loans.
But sellers don't want to admit reality. They're not hitting the buyer's bids. They're hanging on to the garbage securities, hoping against hope that they won't have to sell at the true market prices. And the government is busy trying to figure out ways to prop up the price of the garbage rather than forcing banks to take their medicine now, even if it means the result is that they have to temporarily be nationalized or put into receivership.
There are plenty of buyers for bad paper — but too few sellers willing to hit buyers' bids.
I understand why this is occurring: Policymakers are afraid of mass insolvencies. So they're trying to figure out how to do something akin to the early 1980s use of Regulatory Accounting Principles (RAP), which papered over insolvencies in the Savings & Loan industry.Of course, papering over the problem didn't mean it went away. No surprise, then, that the unofficial nickname for RAP used to be Creative Regulatory Accounting Principles; you can figure out the acronym yourself.
Worse, many of the S&Ls that were granted forbearance were also allowed to try to grow their way out of insolvency. They increasingly gambled on new ventures, especially commercial real estate, to do so. Result: They eventually blew up anyway — at a much LARGER cost to U.S. taxpayers.
This strategy of delay, stall, and hope has another more recent analog: It's exactly what we saw in the early days of the housing market downturn. Sales VOLUME dried up, while the SUPPLY of homes for sale surged.


Yet reported median prices didn't decline. I lost count of how many people asked me: If the market is so bad, why aren't prices falling? I answered that fewer and fewer buyers were paying inflated prices, holding up the median.
But the huge build up in supply and dramatic fall off in the sales pace meant it was just a matter of time. The TRUE, underlying market value of U.S. homes was declining; it just wasn't being acknowledged by most sellers yet. Sure enough, the numbers eventually took a dramatic turn for the worse. It's kind of like those old Road Runner cartoons, where the coyote runs over the cliff but doesn't start plunging until he looks down.
It was just a matter of time before the true, underlying market value of U.S. homes sharply declined.
My Prescription: Deal with the Problem Head On!
The longer the industry tries to push out the day of reckoning ... and the longer Washington pretends the problem is accounting rules (or even worse, short sellers, who also were cast as the latest bogeyman for the banking sector) ... the longer this recession is going to drag on. It also increases the chance we end up like Japan, with zombie institutions consuming more and more government dollars even as the economy stagnates.
Think I'm crazy? Then consider this: If institutions just bit the bullet a year or two ago, and unloaded all this crappy paper at the then-available prices, they would be in clover today. They would have gotten much higher prices for these assets.
But they followed the delay, stall, and hope doctrine — and instead of learning from that mistake and changing course, they're STILL making the same mistake today. They're still saying their modeled prices are the "real" prices and that anyone who suggests otherwise doesn't know what he's talking about. They say if the accounting procedures are modified, and the regulators forebear, everything will be fine down the road.
That strategy didn't work for the S&Ls in the 1980s. It didn't work in Japan in the 1990s. It hasn't worked so far this time around. And I don't think it will work in the future.
Until next time,
Mike

AIG kerfuffle preventable? Solvable?

According to Sen. Ron Wyden of OR, a modest little bill he and Olympia Snowe introduced over a month ago could have prevented the AIG bonus outrage by capping the bonuses of any institution receiving TARP funds at $100k and taxing anything over that at 35%. I fail to see what he's talking about. For those bankers making millions in salary and/or bonuses, they are already allegedly being taxed at 35%. After the various dodges that the tax code accords the ruling class, it comes out to far less, but there is nothing in Wyden's proposal that undoes any of the aformentioned dodges. Here's a modest proposal: go back to the tax code that preceded Ronald Reagan, when the top rate was 50%. Better yet, go back to the Eisenhower years, a time of great prosperity, I'm led to understand. The best off paid a marginal rate of 94%. What is particularly outrageous to me is this whole thing is that the people who pulled down these outrageous amounts of money didn't just do it in the last couple years. They have been draining the system for a decade and taking advantage of Clinton-era deregulation. If we really want to make it fair, a "Jubilee" rule would have to be temporarily imposed to claw back the ill-gotten gains of the last ten or so years. That would kick-start funding for a decent health insurance system.
On a more optimistic note, other legislators are talking about imposing even higher taxes on TARP recipients' employees who get big payoffs. It could open the door for generally fairer redistribution of wealth. Why shouldn't rich movie stars and jocks also shoulder the burden?
Article is posted in the first comment.

Two Posts from the New England Journal of Medicine

I continue to find my perusal of the NEJM insightful. Perhaps it's because I work in the health care industry, but I feel strongly that having health care professionals on board is crucial to real reform. The things I've been reading in NEJM in recent months are quite encouraging.

http//content.nejm.org/cgi/content/full/369/11/1057?query=TOC

http//content.nejm.org/cgi/content/full/360/9/855?query+TOC

The reckless at AIG to get huge bonuses of taxpayer money.

AIG has received $170 billion in our tax money after it destroyed itself, and threatened us with an even bigger economic disaster, and had to be bailed out. The leaders of AIG, a U.S. government-owned corporation, decided that the people who contributed to the financial crisis should receive bonuses for their good work. Outrageous.

Bloomberg says $1 billion

Financial Times says $450 million for the derivative traders.

Employee Free Choice Act - good summary.

EFCA summary at Democracy Now
It was introduced on Tuesday, so this is hot! (This is a late, late Sunday posting.)

Stadium bridge is falling down, falling down, falling down.

Stadium Road has a bridge over State Street that is falling down, and since there is no plan, it may not get stimulus money. The city government of Ann Arbor has known about this since at least 2007. The city is managing to build an expensive new building in City Hall's parking lot, but a bridge on one of our busiest roads is falling apart, and has been reduced to two lanes, a terrible bottleneck.

"Building Bridges" in the Ann Arbor Chronicle

"City Still Studying Stadium Bridge"

FDA Pick Spent Life 'Preparing for This Job'

President Obama's nominee for FDA commissioner — Dr. Margaret Hamburg — has held one of the toughest jobs in public health.

From 1991 to 1997, Hamburg was New York City's health commissioner, overseeing what had been a storied but demoralized department facing the HIV epidemic and budget cutbacks. A New York Times editorial credited her with raising agency morale and channeling money back to the department.

Her experience could serve her well at the FDA, as low morale ripples through an agency considered underfunded, even by members of Congress who have criticized the FDA for lax food safety oversight and drug approvals.

http://www.npr.org/templates/story/story.php?storyId=101914671

Wealthiest Americans still pay far less in taxes than under Regan or Nixon

Republicans are distorting the facts, and we need to set the record straight: Obama's budget asks far less of the rich than President Reagan or Nixon did.

The media has been obsessing about President Obama's plan to roll back the Bush tax cuts for the wealthiest Americans—from 35% to 39.6%—even asking if that makes him a socialist.¹

But do you know what tax rate the wealthiest Americans paid on the top portion of their earnings at the end of Ronald Reagan's first term? 50%.

Under Richard Nixon? 70%. Under Dwight Eisenhower? 91%!

The budget cuts taxes for 95% of working Americans who are struggling to make ends meet. And to pay for the investments we desperately need to get our economy moving again, it closes tax loopholes for big corporations and rolls back the Bush tax cuts for the wealthiest Americans

$100 Billion the Country Could Use - Offshore Bank Accounts

Senate investigators estimate that Americans who hide assets in offshore bank accounts are failing to pay about $100 billion a year in taxes. In good times, that’s grossly unfair and bad for the country. In times like these, it should be intolerable. The government not only needs the money, but closing down such tax scams is essential for President Obama’s rescue effort to retain public support and credibility.

Some of the banks at the center of the global financial meltdown are prominent purveyors of evasion services. UBS of Switzerland has acknowledged that as of Sept. 30, it held about 47,000 secret accounts for Americans. It has refused to disclose the names of all but a tiny number of the account holders, arguing that it would be a breach of Swiss law. But last month — after UBS got caught soliciting business in the United States — it admitted to breaking federal law by helping Americans hide assets, and the bank agreed to pay $780 million in fines and restitution.

http://www.nytimes.com/2009/03/14/opinion/14sat1.html

Labor Secretary Proposes Suspending Farm Rules

Labor Secretary Hilda L. Solis announced Friday that she would suspend regulations that the Bush administration introduced in December to make it easier and cheaper for agricultural employers to use foreign workers in temporary jobs.

Just hours after being officially sworn on Friday morning, Ms. Solis said she would suspend the regulations for nine months. The move could create turmoil for growers who had already applied to bring in temporary farm workers under the new rules.

http://www.nytimes.com/2009/03/14/us/politics/14labor.html?_r=2&ref=us

Obama sets new course at the U.N.

UNITED NATIONS, Mar 12 (IPS) - After nearly a decade of an often tense and estranged relationship with the United Nations, Washington appears to be taking a much more conciliatory and multilateral approach to the world body.

U.S. President Barack Obama formally restored funding for the U.N. Population Fund (UNFPA) Wednesday by signing a major spending bill, prompting U.N. officials to again welcome the policy shift on women’s health-related rights.

In January, Obama issued an executive order lifting an eight-year ban on U.S. funding for overseas family-planning groups and clinics that perform or promote abortion or lobby for its legalization.

"We are delighted that the United States will, once again, take a leading role in championing women’s reproductive health, and rights," said UNFPA’s executive director Thoraya Ahmed Obaid. "This is a great day for women and girls.


http://ipsnews.net/news.asp?idnews=46093

From the Folks Who Brought Us the Weekend (More about the EFCA)

Hi, everybody--

If I hurry, I'll actually get this posted before midnight!;)

Today I'm in a strong pro-union mood, and I'd like to draw your attention to an eloquent and direct op-ed published in a Portland (Maine) newspaper--with thanks to "Bill in Portland Maine" for the lead. The two pro-union Republicans who wrote it put the case for supporting the Employee Free Choice Act about as effectively as I have ever seen it done. Bottom line: we must work hard to recreate the mindset among the American populace as a whole that "everyone does better when everyone does better" (more or less directly from Jim Hightower). In other words, the true health and stability of our economy are to be gauged by our ability to meet the needs of all people for food, clothing, shelter, healthcare and education, not by the margins of profit obtained by the Fortune 500--and historically we've done better with meeting those needs when we have a respected and active union presence. This is going to be an important piece of legislation for us to secure, and the votes in the Senate are not solid. I'll look up the information for us to be able to do our own follow-up on that and bring it to the meeting on Sunday.

The other article I am going to link to today has a dateline of the 11th, but I just discovered it today. I realize that it's not enough to focus only on the personal shortcomings of particular individuals who advocate for positions that we don't like; that sort of ad hominem strategy is counter-productive in the long run. However, if the conduct of people who are taking a prominent role in the fight to defeat health care reform is arguably corrupt or fraudulent, then I do think it's important to spread the word about how these people really don't have our best interests at heart. That's what this Nation expose of Rick Scott, the new head of a new (misleadingly named) advocacy group, Conservatives for Patients' Rights, accomplishes, by detailing Scott's role as the CEO of Columbia/HCA, at one point the largest for-profit hospital chain in the U.S. Under Scott's leadership, the company defrauded Medicare to such an extent that the charges were settled for $1.7 Billion (with a B). This article reinforces the message that Scott and his ilk ARE NOT to be trusted, and they do NOT act on our behalf.

I'm looking forward to seeing folks on Sunday.
In solidarity,
Catherine

News from Europe

The view from Europe is very different from the view from the US. That is always the case, but I have never felt it as forcefully as now (except right after September 11). The financial/economic crisis is getting worse. France, which was doing better than most until the end of 2008, is now plunging into recession. http://www.ft.com/cms/s/0/ae7c2c3a-0d5e-11de-8914-0000779fd2ac.html.
The figures from other countries are not much better.

Eastern European countries face even worse times, because of their wild ride from a state-managed economy to "Anglo-Saxon" capitalism and their borrowing in foreign currencies (a move that leaves me gasping, I have to say).
http://www.ft.com/cms/s/0/c786ce82-0d4b-11de-8914-0000779fd2ac.htmlB

And yet, perhaps wrongly, the tone of analyses and reportages in the media is much less alarmed and alarmist than in the US. Perhaps the Europeans are in denial. Perhaps the social consequences of the crisis are less dire, at least in the core of euroland: furlough pay keeps you going for up to two years, regions are not dependent on a single industry (as the Midwest is), families may be more able to absorb the economic downturn and help members who have lost their jobs, public health care is a given, universities remain publicly financed and therefore affordable, etc. etc.

Here follows a good piece explaing how the EU works (or doesn't, for those who continue to see only its dark side)
http://www.ft.com/cms/s/0/0b2bd672-0dac-11de-a10d-0000779fd2ac.html

And an explanatioon of why the EU is reluctant to increase public spending as much as the US is.
http://www.ft.com/cms/s/0/70d77274-0db1-11de-8ea3-0000779fd2ac.html

A survival plan for global capitalism

The FT is positioning itself as the repentant capitalist, with an interesting series on the future of capitalism. For social democrats like me, it all looks and reads like deja vu, deja connu, but if it helps persuade hysterical supporters of the unfettered market that such an era is over, I welcome its effort.

http://www.ft.com/cms/s/0/b85b3572-0c0d-11de-b87d-0000779fd2ac,dwp_uuid=ae1104cc-f82e-11dd-aae8-000077b07658.html

And here is an article on Adam Smith by Amartya Sen, Nobel prize in economics and very important political and moral philosopher. There is nothing new in the article (and reading Adam Smith as if he were 100 per cent our contemporary makes no sense), but, as my ancestors used to say, repetita iuvat (repetition helps).

http://www.ft.com/cms/s/0/8f2829fa-0daf-11de-8ea3-0000779fd2ac,dwp_uuid=ae1104cc-f82e-11dd-aae8-000077b07658.html

Greenhouse emissions
There is an interesting project afoot for keeping track of toral greenhouse emissions

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/10/AR2009031001445.html?wpisrc=newsletter&wpisrc=newsletter&wpisrc=newsletter

And a forecast which may help you decide what to do with your money (in case you have money to invest)

Roubini of RGE Monitor: Stock Market to Go Much LowerNouriel Roubini – Chairman of RGE Monitor and Professor of Economics at the NYU Stern School of Business – discusses his recent views on the link between the real economy and stock market performance.
Can we rule out another bear market rally some time in 2009?
No, we cannot rule out another bear market sucker’s rally in 2009, most likely in Q2 or Q3. The drivers of this rally will be the improvement in second derivatives of economic growth and activity in U.S. and China that the policy stimulus will provide on a temporary basis. Given the severity of macro, household, financial firms and corporate imbalances in the U.S. and around the world this Q2 or Q3 sucker’s market rally will fizzle out later in the year like the previous 5 ones in the last 12 months.
What are the downside risks to these bearish predictions for U.S. and global equities?
ROUBINI
On the downside there is at least a third probability of an L-shaped global near depression rather than the mere current severe U-shaped recession. If a near depression were to take hold globally a 40% to 50% further fall in U.S. and global equities from current levels could not be ruled out. But in this L-shaped near depression the last thing one would have to worry about would be stock markets as more severe issues would have to be addressed.
What are the upside risks to these bearish predictions for U.S. and global equities?
On the upside, we have an aggressive policy stimulus in the U.S. and other countries that might lead to a faster sustained economic and financial markets recovery that expected here. The bullish argument for a non-bear market and early persistent recovery of global equities is based on a better than expected recovery of the U.S. and global economy.
Bottom Line: P/E and S&P Index
Earnings per share (EPS) of S&P 500 firms will be in the $ 50 to 60 range, but they could fall to $40. The price earnings (P/E) ratio may fall in the 10 to 12 range in a U-shaped recession. If earnings are closer to 50 or the P/E ratio falls to 10 then the S&P could fall to 600 (12 x 50 or 10 x 60) or even to 500 (10 x 50). Equivalently the Dow (DJIA) would be at least as low as 7000 and possibly as low as 6000 or 5000.

Nouriel expounded the above topics further at the CBOE 25th Annual Risk Management Conference at Laguna Beach where he was the keynote speaker. Our audience can download the speech here: part 1, part 2 and part 3.

Foreclosure Filings Rise 6 Percent in February Over January

By Renae Merle
Washington Post Staff Writer
Thursday, March 12, 2009; 12:06 AM

Foreclosure filings rose 6 percent in February compared with the previous month, according to RealtyTrac, a private firm that collects housing data.

The firm counted 290,631 filings nationally, which can range from default notices to bank repossessions. That was up 30 percent compared with the same period a year ago, according to the report. RealtyTrac says it collects data on more than 90 percent of U.S. households.

(The whole article is in the first comment.)

Freddie Mac loses $50 billion in 2008

Mortgage Giant Needs Infusion to Stay Afloat, Names Interim Chief

By Zachary A. Goldfarb
Washington Post Staff Writer
Thursday, March 12, 2009; D01

Freddie Mac reported yesterday that it lost $50.1 billion last year, almost half of it in the final three months of 2008, and would need an additional $30.8 billion in taxpayer assistance to stay solvent.

(The whole article is the first comment.)

Dumbest Idea Yet for Healthcare: Tontines

This opinion piece in Monday's NY Times astounded me for the way that it identified a minor aspect of our health-care mess as central, namely healthy young people who can afford health insurance but won't pay for it because they feel they won't need it. Even better is the proposed solution: special policies for such people who can get a refund if they go a certain number of years without using the benefit. The authors don't have any comprehensive economic rationale; rather they rely on an obscure period of early 20th Century Italian life-insurance history. Brilliant! Am I missing something, or are these two geniuses missing the point that the far bigger problems are the lack of affordability for about 20% of the population, or people staying in jobs they can't do well or hate because they need the health benefit, or the 25% of premiums that disappear into insurance company profit and overhead? I've yet to see any of the brilliant theorists proposing solutions other than a single payer national plan come up with a fact-based reason why single payer is not the best plan.
By the way, there is a rally to support single payer and HR 676 (Conyer's elegant single player bill) at the Ford Conference Center1151 Village Rd in Dearborn. Hope to see you there.
The referenced article is in the first comment.

Sustainability (and the recent lack thereof...)

Tom Friedman, that champion of globalization, has a readable and intelligent take on the recent global capitalist model.

http://www.nytimes.com/2009/03/08/opinion/08friedman.html

More News from Friday, March 6

Hi, all--

Sorry not to post on time again. I had a last-minute opportunity to go out of town this weekend and didn't have enough time to gather information for you-all on Friday before I left. Somewhat belatedly, then, here are some highlights from Friday posts, plus a superb, comprehensive summary related to the core issues besetting the financial segment of the economy (and then some).

I'll start with the overview, for that matter, thanks to a commenter from Daily Kos on Hunter's polemic today. (I surmise it's not stepping on anyone's toes to link to a report that was actually published over a month ago.) It's called "Wall Street's Best Investment: Ten Deregulatory Steps to Financial Meltdown," which appeared in the Jan/Feb 2009 issue of an online journal called Multinational Monitor. [Background: If you check out the journal's home page, you'll see some links to background information about the publication, as well as subscription info. It appears to be a conscientious journalistic undertaking, from what I can tell, and the contributors/editors I recognize are reputable. It is devoted to the aim announced in its title: to keep track of, and inform the general public about, the activities of multinational corporations and their impact on the global and local economy; clearly, it does so with a critical eye but it is interested in responsible reportage.] For that matter, on Friday 3/6 the editor published an update, adding two more key steps to his executive summary of the regulatory changes that enabled this catastrophe. The first, "front-page" story is very long and detailed; the blog update is much more condensed.

If you do link to either of these, you'll see that they are based upon a much longer report (called "Sold Out") which is also available online, via Wall Street Watch. org. Tracking back the connections one more step takes us to the two off-line, real-world "parent organizations" which sponsor Wall Street Watch, Multinational Monitor, and Essential Action. (Please follow the link to see the details about the interconnections between these groups, Consumer Education Foundation and Essential Information.)

The latter organization is well worth knowing, and I apologize in advance if indeed you are already aware of it. Essential Information was founded in 1982 by Ralph Nader and has sponsored many important reports and investigations during the past 25 years. Given the Nader connection and the organization's interest in covering multinationals, it seems fair to conclude that the group's positions are pretty far left for a mainstream organization. It also appears to be an effective information clearinghouse specializing in exactly the three topics we have chosen as our main focus, hence probably well worth checking out more thoroughly.

After a few minutes of websurfing, I can't say I'm confident in commenting about the Consumer Education Foundation. I don't have the time to track down details about the group, and haven't located a specific web presence for them. The man most frequently associated with it, Harvey Rosenfield, has appeared among good progressive company in making cogent critiques of the economic melt-down. On the other hand, the folks at "California Majority Report" (a generally Democratic-leaning blog) have directed some pretty harsh commentary at Rosenfield. So, the deep background on this one is yet to be completed.

Paul Krugman is as usual worth reading, but I found Charles Blow's commentary more satisfying this time around. I especially like his soubriquet attached to Jindal, Steele and Limbaugh: "the axis of drivel." Isn't that a great pun?

I may be back later with more tidbits from Friday, but I actually think in terms of volume and background info the first link above is very helpful. I certainly hope we are able to amass the information and resources necessary to decide how to shape our group's actions, taking part in our local and national response to the crisis.

Thanks!

How to fail to recover the economy

America provides important lessons to countries around the world facing increasing problems with their banks

o Joseph Stiglitz
o guardian.co.uk, Sunday 8 March 2009 18.00 GMT

Some people thought that Barack Obama's election would turn everything around for America. Because it has not, even after the passage of a huge stimulus bill, the presentation of a new program to deal with the underlying housing problem, and several plans to stabilise the financial system, some are even beginning to blame Obama and his team.

Obama, however, inherited an economy in freefall, and could not possibly have turned things around in the short time since his inauguration. President Bush seemed like a deer caught in the headlights – paralysed, unable to do almost anything – for months before he left office. It is a relief that the US finally has a president who can act, and what he has been doing will make a big difference.

Unfortunately, what he is doing is not enough. The stimulus package appears big – more than 2% of GDP per year – but one third of it goes to tax cuts. And, with Americans facing a debt overhang, rapidly increasing unemployment (and the worst unemployment compensation system among major industrial countries), and falling asset prices, they are likely to save much of the tax cut.

(The first comment is the whole article. Click on the title to display it.)

Top House Republican calls for spending freeze

(The Republicans still don't understand that the stimulus needs to make up for the spending consumers can no longer do because of lost jobs, etc. Or else they are playing politics. If we are not in a depression now, a freeze would certainly send us into one. A sufficiently large stimulus will keep us from getting stuck in another Great Depression. -- Gus)

March 6, 2009

WASHINGTON (AP) — The top Republican in the House is seizing on the latest spike in unemployment to call for a freeze on government spending and to urge President Barack Obama to veto a $410 billion spending bill.

Rep. John Boehner, R-Ohio, said the jump in unemployment to 8.1 percent and the loss of 651,000 jobs in February is a sign of a worsening recession that demands better solutions from both parties.

Boehner criticized the spending bill as chocked full of wasteful, pork-barrel projects. The Senate postponed a vote on the bill until Monday amid the criticism.

Boehner said he hoped Obama would veto the bill. He urged the president to work with House Republicans to impose a spending freeze until the end of this fiscal year.

Copyright © 2009 The Associated Press. All rights reserved.

Frank Rich: Some Things Don't change in Grover's Corners

March 8, 2009
By FRANK RICH

“WHEREVER you come near the human race, there’s layers and layers of nonsense,” says the Stage Manager in Thornton Wilder’s “Our Town.” Those words were first heard by New York audiences in February 1938, as America continued to reel from hard times. The Times’s front page told of 100,000 auto workers protesting layoffs in Detroit and of a Republican official attacking the New Deal as “fascist.” Though no one was buying cars, F.D.R. had the gall to endorse a mammoth transcontinental highway construction program to put men back to work.

(The whole article is the first comment. Just click on the title.)

Obama gets high marks in the latest NEWSWEEK poll, with the GOP in the doghouse.

Despite the tumbling economy, Barack Obama continues to enjoy a honeymoon with the American public in the face of the most trying crisis any newly inaugurated president has encountered since Franklin Delano Roosevelt. The GOP, meanwhile, is viewed by a majority of Americans as the party of "no," without a plan of its own to fix the economy, and even rank-and-file Republicans are concerned about the party's direction, according to the first NEWSWEEK Poll taken since Obama assumed office.

"People give Obama credit for reaching out to Republicans, but they don't see Republicans reciprocating," says pollster Larry Hugick, whose firm conducted the survey. "A surprising number said bipartisanship is more important than getting things done."

Overall, 58 percent of Americans surveyed approve of the job Obama is doing, while 26 percent disapprove and one in six (16 percent) has no opinion. Although his approval ratings are down from levels seen a few weeks ago in other polls, 72 percent of Americans still say they have a favorable opinion of Obama—a higher rating than he received in NEWSWEEK Polls during the presidential campaign last year. The president's rating in this poll is consistent with estimates provided by other national media polls in the last week.

http://www.newsweek.com/id/188002

Conservatives angry over Michelle Obama's trip to homeless shelter

It seems Michelle Obama can't even do a good deed without inspiring some outrage on the right.

The first lady visited a Washington, D.C., homeless shelter on Thursday, bringing fruit collected in a White House food drive and serving some of the shelter's clients. That alone isn't objectionable, of course. But some conservatives -- sparked by a blog post from the Los Angeles Times' Andrew Malcom -- are in a tizzy over an Associated Press photo that shows a man taking a picture of Obama using a cellphone.

"It doesn't detract from the first lady's generous gesture or the real needs she seeks to highlight to ask two bothersome journalistic questions about these news photos," Malcom wrote, continuing:

If this unidentified meal recipient is too poor to buy his own food, how does he afford a cellphone?

And if he is homeless, where do they send the cellphone bills?

(The rest of this article is contained in Comments below)

Obama: US should reach out to Taliban moderates

President Barack Obama says he hopes U.S. troops can identify moderate elements of the Taliban and move them toward reconciliation.

Asked in an interview with The New York Times if the United States is winning in Afghanistan, Obama said "no," while adding "our troops are doing an extraordinary job in a very difficult situation."

"But you've seen conditions deteriorate over the last couple of years. The Taliban is bolder than it was. I think ... in the southern regions of the country, you're seeing them attack in ways that we have not seen previously," Obama said in the interview, which was posted Saturday on the Times' Web site.

(See full article in Comments below)

Obama to overturn stem cell funding ban

ABC News' Jake Tapper is reporting that President Obama will move on Monday to lift former President Bush's ban on federal funding for research on embryonic stem cells.

"President Obama will hold an event at the White House in which he signs an executive order overturning the ban," Tapper says. "The announcement will be about 'restoring scientific integrity to health care policy,' an administration official tells ABC News."

Bush's order had allowed funding on research for stem cell lines already in use, but that proved to be much less valuable than he'd promised. He'd also vetoed efforts to lift the ban.

One side effect of Obama's move could be a political disadvantage for Democrats. Stem cells were the best social wedge issue Democrats had found, and it was one that proved to be pretty effective.

Although the exact wording of the order has not been revealed, the White House plans an 11 a.m. ceremony to sign the order repealing one of the most controversial steps taken by his predecessor, fulfilling one of Obama's eagerly anticipated campaign promises.

Martin Wolf’s excellent article on the pros and cons of nationalisation

Baseline Scenario posted a commentary on the pros/cons written by Martin Wolf and referenced in a recent letter to The Financial Times by Peter Boone, Chairman, Effective Intervention; Centre for Economic Performance, London School of Economics, UK. The article was published in FT on March 3, 2009 and includes charts/graphs and a clear explanation.

Lindsey Graham, the Republican senator, Alan Greenspan, the former chairman of the US Federal Reserve, and James Baker, Ronald Reagan’s second Treasury secretary, are in favor. Ben Bernanke, current Fed chairman, and an administration of liberal Democrats are against. What is dividing them? “Nationalisation” is the answer.

In 1978, Alfred Kahn, an adviser on inflation to President Jimmy Carter, used the word “depression”. So angry was the president that Mr Kahn started to call it “banana” instead. But the recession Mr Kahn foretold happened all the same. The same may well happen with nationalisation. Indeed, it already has: how else is one to describe the actions of the federal government in relation to Fannie Mae, Freddie Mac, AIG and increasingly Citigroup? Is nationalisation not already the big financial banana?

Much of the debate is semantic. But underneath it are at least two big issues. Who bears losses? How does one best restructure banks?

http://www.ft.com/cms/s/0/f24fc392-082a-11de-8a33-0000779fd2ac.html?nclick_check=1

Obama Demands Better Health Care for All: "This Time, We Will Not Fail"

(NOTE: Reference to Health Care for America Now) President Obama kicked off his ambitious goal of reforming health care and providing insurance to all Americans, the first major government effort at reform in 15 years. At the White House's health summit, Obama pledged to pass comprehensive legislation this year, despite economic crises and U.S. engagement in two overseas wars. "When times were good, we didn't get it done. When we had mild recessions, we didn't get it done," Obama said. "There's always a reason not to do it. Now is exactly the time for us to deal with this problem." Indeed, with increasing job losses, approximately 14,000 Americans are losing their health coverage every day. Forty-six million Americans are without health insurance (86.7 million over the last two years), while others are paying more than they can afford. The health care cost share of GDP "is anticipated to rise rapidly from 16.2 percent in 2007 to 17.6 percent in 2009, largely as a result of the recession, and then climb to 20.3 percent by 2018." Referring to a statement made by Health Care for America Now's Richard Kirsch, Obama addressed the cost issue, arguing that "by covering more people, we can also lower costs at the same time, presumably because those who are not insured at the moment are ending up using extraordinarily expensive emergency room care."
http://www.alternet.org/healthwellness/130545/obama_demands_better_health_care_for_all%3A_%22this_time%2C_we_will_not_fail%22/

Surging U.S. Unemployment Rate Puts Pressure on Obama

The jump in the U.S. unemployment rate to the highest level in a quarter century last month suggests the recession is deeper than the Obama administration forecasts and additional measures may be needed to restart growth.

The jobless rate rose to 8.1 percent in February as employers reduced payrolls by 651,000, the Labor Department said yesterday in Washington. Losses have now exceeded 600,000 for three straight months, the first time that’s happened since collection of the data began in 1939.

Unemployment has already reached the average rate the White House projected for the whole year. The administration needs to keep its focus on repairing the banking system and implementing the stimulus rather than get diverted by other goals such as healthcare changes, said John Ryding, chief economist at RDQ Economics LLC in New York.

http://www.bloomberg.com/apps/news?pid=20601103&sid=a2sWlnEIj58U&refer=news

White House health care meeting report.

When Obama did not invite any single-payer advocates to Thursday's White House meeting, the single-payer folks threatened a protest, and then two of their representatives were invited, Rep. Conyers and the president of Physicians for a National Health Program.

It's text and audio from Democracy Now! Health care meeting report.

Obama's public health plan is being left out of some reports too, e.g. the Washington Post on Thursday.

Foreclosure plan details, stimulus notes, renewable energy, water.

Odds and ends for today, some encouraging.

1. The details of Obama's foreclosures plan
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/04/AR2009030400911.html?wpisrc=newsletter

2. An an interesting, alternative proposal in today's NYT: let's lower the nominal amount of the principal of houses with market value lower than the amount of the mortgage

http://www.nytimes.com/2009/03/05/opinion/05geanokoplos.html?_r=1&scp=3&sq=op-ed&st=cse

3. A note from Roubini's web site:

Will China Increase Its Stimulus Spending? How Much Will it Support Growth?
Reports suggest that Chinese Premier Wen may announce additional stimulus measures at the Central party conference in his speech on March 5. China may double its spending from the 4 trillion yuan invested - spending more on infrastructure and to boost manufacturing and on unemployment and social spending - even as concerns are being raised about where the previously announced stimulus is being spent

4. Good news for the producers of renewable energy.

http://www.ft.com/cms/s/0/9cccc2fc-08ee-11de-b8b0-0000779fd2ac.html

5. Water distribution and management is and will continue to be one of the hot issues in the 21st century. Here is news from India about attempts to improve sanitation.

http://www.wateraid.org/india/news/7254.asp

Ann Arbor City Council passes resolution to endorse the Iraq Water Project

March 1, 2009: Ann Arbor City Council unanimously passed a resolution to endorse the Iraq Water Project – Ann Arbor.

This project is a joint effort between Michigan Peaceworks and Veterans for Peace to send badly needed water treatment units to Iraqi schools and hospitals.

Michigan Peaceworks Executive Director Laura Russello, and Michigan Peaceworks Intern Miku Kawakami presented the various achievements of the project, which include a showing of the movie F.L.O.W and fundraiser at the Michigan Theater, a rally on campus to support the project and raise money, student group run fundraisers, and several well-attended house parties. Art Dorland, National Director of the Iraq Water Project also made a special guest appearance at the City Council meeting.

(See full article in Comments below)

Ann Arbor officials prepare wishlist for stimulus package funds

City Council prioritizes its public works projects to be funded by Obama's economic stimulus plan
By Lara Zade
Daily Staff Reporter On March 1st, 2009

After Congress passed its $787 billion stimulus package last month, Ann Arbor City Council members quickly began talking about how some of that money might be used to help the city.

While the federal plan stipulates that 36 percent of the stimulus money must go toward tax rebates, the other 64 percent will be used for “shovel-ready” social programs issued at the state level and often administered at the local level.

(See full article in Comments below)

Perverse results created by economic crisis.

I suppose it should come as no surprise, but the following article reveals how difficult it can be to achieve just results when there is an economic crisis. I can't understand how the managers at the FDIC and other institutions couldn't just renegotiate the failing mortgages on their own and keep 100% of the renegotiated payments in their own system. Instead, they are giving away the store for "pennies on the dollar" to the people who are probably contributors to the whole mess, all because they are allegedly more "creative" in devising refinancing. How creative is it to offer a 3% interest rate to a defaulting mortgagor? I could have thought of that! I wish I could roll all my debts into a 3% loan. To top it off, they could very well structure the business so that the profits count as a capital gain, and thus subject to a lower tax rate than ordinary income. The full story is in The New York Times.

A Health Reform Article from the NEJM

I think it's important to see what the medical community is saying about health care reform, so I submit this article from the New England Journal of Medicine. Article in first comment...

All troops out of Iraq by December 2011

February 28, 2009
With Pledges to Troops and Iraqis, Obama Details Pullout
By PETER BAKER

CAMP LEJEUNE, N.C. — President Obama declared the beginning of the end of one of the longest and most divisive wars in American history on Friday as he announced that he would withdraw combat forces from Iraq by August 2010 and all remaining troops by December 2011.

(The whole article is in the first comment. I'm including this because getting out of Iraq is important for many reasons, including saving the money for health care and conversion to green energy.)