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"There Are Reasons"

By Big Tent Democrat, Section Economy
Posted on Tue Mar 31, 2009 at 08:25:14 AM EST
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Eugene Robinson writes:

Both the credit crunch and the reluctance of consumers to spend what money they have left are the direct result of Wall Street's atrocious misbehavior. Yet the administration's plan for rescuing the banking sector involves generous inducements, big subsidies and the opportunity for wealthy investors to become much wealthier while assuming very little risk. There are reasons for structuring the bank bailout this way, and there are reasons to take a get-tough attitude with the auto companies. But the juxtaposition is galling -- and, for many autoworkers, potentially devastating.

(Emphasis supplied.) What are those reasons? I think the Geithner Plan is going to fail. Surely the reason is not that. I assume they think it is going to succeed. But is it really the only way to accomplish a plan Obama/Geithner think will succeed? Really?

Speaking for me only

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    "There Are Reasons" | 44 comments (44 topical)

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    It all defies my understanding (5.00 / 3) (#1)
    by Militarytracy on Tue Mar 31, 2009 at 08:41:31 AM EST
    I wonder what Obama will do with the blowback from being told at the G-20 by some European leaders that they aren't onboard for creating anymore false economic excesses?

    Europeans aren't acting too smartly either (none / 0) (#3)
    by BobTinKY on Tue Mar 31, 2009 at 08:47:51 AM EST
    Their failure to provide massive stimulative government spending is indefensible notwithstanding their vastly superior social support for the unemployed.

    Obama's trust in Geithner is as misplaced as Geithner's plan is misguided.  Obama, however, is heading slowly in the right direction with regard to stimulus spending.  We need more stimulus spending both from our government and the EU, China & others.

    Parent

    Yes, Euros not so smart either (5.00 / 1) (#11)
    by DFLer on Tue Mar 31, 2009 at 08:57:20 AM EST
    see Krugamn's comments

    Now, in fairness we have to say that the United States was far from being the only nation in which banks ran wild. Many European leaders are still in denial about the continent's economic and financial troubles, which arguably run as deep as our own -- although their nations' much stronger social safety nets mean that we're likely to experience far more human suffering. Still, it's a fact that the crisis has cost America much of its credibility, and with it much of its ability to lead.


    Parent
    I try not to get frustrated (none / 0) (#10)
    by Militarytracy on Tue Mar 31, 2009 at 08:56:28 AM EST
    There isn't anything that I can do about the existing situations other than voice my opinions.  I like it that Europe easily sees the failings of the Geithner plan and I hope that they can wake a few Americans up, but I do not understand the reluctance of some European leaders to fund job creation.  I don't understand how they find that a risky losing proposition.

    Parent
    It's a question of trust and faith I guess. (5.00 / 4) (#9)
    by EL seattle on Tue Mar 31, 2009 at 08:55:32 AM EST
    This conversation has been echoing in the back of my mind lately...

    Linus van Pelt: He'll come here because I have the most sincere pumpkin patch and he respects sincerity.

    Sally Brown: Do you really think he will come?

    Linus van Pelt: Tonight the Great Pumpkin will rise out of the pumpkin patch. He flies through the air and brings toys to all the children of the world.

    Sally Brown: That's a good story.

    Linus van Pelt: You don't believe the story of the Great Pumpkin? I thought little girls always believed everything that was told to them. I thought little girls were innocent and trusting.

    Sally Brown: Welcome to the 20th century!


    Eugene Robinson (5.00 / 5) (#14)
    by Cream City on Tue Mar 31, 2009 at 09:04:34 AM EST
    is a fanboy.  And he, with Donna Brazile, began the racism charges that perverted the campaign process, so he is not to be trusted to exercise anything even remotely approaching objectivity or to brook real criticism of his candidate-now-president.  Thus, if you don't see these "reasons" for the actions taken, you are blind.  You are the problem.

    It was sad to see Robinson's downfall.  He used to be worth reading.  Now, as this excerpt shows, he is trying to get aboard the train attacking Wall Street but still trying to make it seem that the White House is not engineering all this.  

    Oh, well, obviously the reasons... (5.00 / 5) (#15)
    by masslib on Tue Mar 31, 2009 at 09:06:15 AM EST
    are that it's Obama's plan, and with Eugene, if it's Obama, it's all good.

    In depth look... (5.00 / 1) (#16)
    by BigElephant on Tue Mar 31, 2009 at 09:06:23 AM EST
    I've taken an in-depth look at the Geithner plan and it actually looks like a decent plan.  Except for one really large hole (which effectively makes it a ripoff for taxpayers).  The incremental cost for the govt to simply buy the assets is ridiculously small.  The benefit of doing this is the taxpayer enjoys huge potential upside (which in the Geithner plan they don't), although they also have the downside risk (but they have that in the plan anyways).

    The reason the Geithner Plan is probably structured the way it is, is because the govt doesn't know how to valuate the assets and they think private investors can.  Well if that's the case, here's a small change that makes the plan way better... the taxpayer splits 50/50 with the private investor on the upside.  The taxpayer can still even take on most of the downside risk.  This small tweak I think wouldn't effect private investment into the plan by much, but would greatly enhance the potential benefit to taxpayers.

    Other than that, Mrs. Lincoln (5.00 / 4) (#17)
    by lambert on Tue Mar 31, 2009 at 09:16:47 AM EST
    Also, the latest indoor sport has been finding all the ways the banksters can manipulate the auctions.

    Parent
    I haven't kept up with that portion of the (none / 0) (#20)
    by Militarytracy on Tue Mar 31, 2009 at 09:21:29 AM EST
    situation lambert.  Do you have some links I could go read up on?  I know it will only bum me more but I'm determined to be informed as much as possible.

    Parent
    Gotta run but... (5.00 / 1) (#37)
    by lambert on Tue Mar 31, 2009 at 01:22:44 PM EST
    the place to read is Naked Capitalism. They really know what they're talking about (people like me are just learning). That's why Krugman blessed the proprietor, Yves, as "shrill."

    http://www.nakedcapitalism.com/

    That's where I read it, among other places. Eg:

    http://www.correntewire.com/let_gaming_begin


    Parent

    Don't trouble your little head ... (5.00 / 3) (#18)
    by lambert on Tue Mar 31, 2009 at 09:17:59 AM EST
    ... about "reasons". Just fork over more money NOW NOW NOW!

    Assume HRC won and is President (5.00 / 3) (#19)
    by BobTinKY on Tue Mar 31, 2009 at 09:20:47 AM EST
    I beleive Summers or Geithner, or some other Rubin protege would be at Treasury and a plan very much like Geithner's would be out there. Krugman would still criticize it but he would be free of the "he doesn't like the President" nonsense used to dismiss his analysis.

    It doesn't matter if you are 100% behind Obama, 80%, 20%.  This plan does not put the public interest first.  It puts first bondholders in the failed belief so prevalent since 1980 that if we only take care of capital providers their activities will insure the rest of us enjoy ourselves.

    It doesn't work that way. It's just a good way of steering evermore wealth to capital providers.  Providing government funds to them is just a more direct way than tax cuts of subsidizing them.  The financial crisis has made it possible.  

    We have been subsidizing the wealthiest among us since 1980, it has to stop.

    The thing about "trickle-down" (5.00 / 2) (#21)
    by Cream City on Tue Mar 31, 2009 at 09:30:44 AM EST
    theory that amazed me even then was that media ignored the obvious:  After the elites got their flood of goodies, all that was left for all the rest of us was a trickle.

    So we're seeing Reaganomics again?  Media won't report that, either.

    Parent

    I sincerely doubt this. (5.00 / 2) (#25)
    by iceblinkjm on Tue Mar 31, 2009 at 09:50:53 AM EST
    It was not Hillary who idolized and prayed at the Altar of Ripper Reagan at the drop of a hat. Hillary would never have ceded this nation's manufacturing base.

    Parent
    A pointless discussion (none / 0) (#27)
    by Big Tent Democrat on Tue Mar 31, 2009 at 09:59:43 AM EST
    Hillary is not the President.

    Parent
    Exactly! (none / 0) (#28)
    by aeguy on Tue Mar 31, 2009 at 10:27:19 AM EST
    Let the HRC comparisons go.

    Parent
    "Reasons..." is this another version (5.00 / 5) (#22)
    by Anne on Tue Mar 31, 2009 at 09:38:47 AM EST
    of the Obama-worshippers' "soon, it will all be made clear" answer to, "what in the name of all that is holy is going on?"

    Next question: is it possible that all the former Wall-Streeters on Obama's staff have their faces pressed so close to the trees that that they have no idea they are standing in the middle of a forest?  Have they listened at all to any economist or so-called expert who didn't have Goldman Sachs on his resumé?

    This is not playing well on the nightly news - and I think it is not sitting well with most people who don't have mid-to-high 6- and 7-figure incomes.  

    Obama and Geithner need to explain to the American people why GM and Chrysler and their employees and creditors are being treated differently from Wall Street; it's the least they can do, but I'm not sure they can come up with one that is believable.

    The auto companies (5.00 / 2) (#32)
    by joanneleon on Tue Mar 31, 2009 at 12:09:23 PM EST
    I'm not sure how reliable this information is, but David Shuster on MSNBC said that the word from inside the administration is that they are leaning toward a structured bankruptcy for GM.  Shuster, of all people, is clearly against this and acts very upset about it.  Another interviewee who seemed to be involved in the negotiations between Chrysler and Fiat expresses anger that the Obama admin. announced that Chrysler must partner with Fiat.  He says that this has put Chrysler in a very difficult situation during negotiations by demanding that the deal go through and by naming the partner.  It leaves them little or no room for negotiation and little hope for striking the best deal for Chrysler.  In other words, they screwed Chrysler over by announcing what they did, when they did.

    If structured bankruptcy means breaking the union and dissolving pensions and healthcare for retirees, I don't see how the admin. comes out of this without committing political suicide.  Especially in light of the treatment of banking industry, I simply can't believe they would do this.  In addition to that, doing this while allowing health insurance companies to operate as usual -- baffling.

    What the heck is he doing?  There has to be a better way.  If this is how it's going, it can't end well.  If I feel the injustice so strongly, how are the people of Michigan (and elsewhere) feeling and what will they do?

    Not sure MSNBC is the most reliable (5.00 / 1) (#33)
    by Inspector Gadget on Tue Mar 31, 2009 at 12:50:49 PM EST
    place to get an unbiased assessment of anything being done by this administration.

    Parent
    There is no Chrysler (5.00 / 1) (#34)
    by Farmboy on Tue Mar 31, 2009 at 12:54:21 PM EST
    only Zool.  Sorry.  Only Cerberus (still an underworld reference).

    I'd keep an eye on the players behind the scenes.  My hunch is that, at least in Chrysler's case, there is a question of good faith on the part of its owners.  How much of the loan money that Chrysler received last fall went straight into Cerberus' pockets?  And when they allow Chrysler to go belly up, how much more will they have received?

    I think that in this case, any harm that comes to the workers is a byproduct of Cerberus playing Gordon Gecko with Chrysler, and Obama not wanting to play along.

    Parent

    I can tell you (5.00 / 1) (#42)
    by cal1942 on Tue Mar 31, 2009 at 02:17:16 PM EST
    how people in Michigan will react.  I've lived here all my life.

    How about raging fury and justifiably so. It was Obama who said that the auto industry would be assisted with retooling to build the best 21st century cars. Obama carried Michigan by 16 points even carrying many traditionally Republican counties.

    Of course people like me will say that all the warning signs were there during the primary.  I voted for Obama (I was going to leave my Presidential slot blank) because I wanted to join in beating the Republicans and because he seemed more progressive in the final months of the campaign.

    So now it appears that assisting the manufacturing sector was just so much campaign fluff.  People are going to be furious, especially since they know full well that his administration is placing its emphasis in the wrong place and is ignoring his claimed support of industry assistance.

    Long term, the nation, not just states like Michigan, will be grievously harmed and the Democratic Party will be harmed in a more immediate sense.  People will associate Obama with the Democratic brand and the brand will suffer terrible damage.

    Parent

    Mr. Robinson (5.00 / 3) (#36)
    by AX10 on Tue Mar 31, 2009 at 01:18:29 PM EST
    along with Donna Brazile, shamelessly pushed the racism charges that dirtied up the primary election. Eugune is on board the "cult of personality" train and has no intention of getting off.

    Geithner Plan fail? (none / 0) (#2)
    by BobTinKY on Tue Mar 31, 2009 at 08:44:16 AM EST
    I don't agree.

    I think it will succeed in its objective, which is to keep whole (with 93% Government funds) bank bondholders and other well heeled interests who would otherwise lose out if the banks were put into government receivership.

    The problem is, in my view, that Geithner has the wrong obejective.  

    It will fail (5.00 / 2) (#6)
    by souvarine on Tue Mar 31, 2009 at 08:51:16 AM EST
    Even Treasury admits that the Geithner plan can only cover about a quarter of the banks solvency problem. Their claim is that this program will "liquefy" the assets and start a market going. But without the government subsidy on the remaining assets the market will lock up again and the bank solvency problem will remain.

    Parent
    This is the point that confounds me (none / 0) (#12)
    by BobTinKY on Tue Mar 31, 2009 at 08:57:44 AM EST
    Once the auction is over and we are into the secondary market for these auctioned off assets, there is no more government subsidy.  How then is the auction value of these assets to be maintained?  And knowing this, why would anyone want in on the auctio?

    Unless you stand to gain more from the infusion into these banks of 92.5% government money than you will lose on the 7.5% of your own money, this auction is a losing proposition.

    Parent

    I think better of Obama/Geithner than you (none / 0) (#5)
    by Big Tent Democrat on Tue Mar 31, 2009 at 08:48:57 AM EST
    I assume they want to fix the financial system.

    Parent
    Certainly they're (5.00 / 2) (#38)
    by cal1942 on Tue Mar 31, 2009 at 01:25:44 PM EST
    trying to save the financial system.  The problem is they're not trying to insure that the nation has A financial system, they're trying to preserve the existing financial system and it's players.  They're trying to save a finacial industry that's systemically rotten.

    Parent
    I think so too (none / 0) (#8)
    by BobTinKY on Tue Mar 31, 2009 at 08:54:34 AM EST
    I think Geithner honestly believes bailing out Wall Street first, socilaizing their losses, is the first key step in all this.  Once the Wall Street ship is righted, we can go back to our winning way, albeit with more oversight (which is good).

    I also think he, and Obama, could not be more wrong about that for all the reasons Stiglitz, Krugman and Simon Johnson enumerate.

    Parent

    And yet (none / 0) (#44)
    by BobTinKY on Wed Apr 01, 2009 at 07:57:55 AM EST
    "And let's be honest, the Obama Administration has shown no desire or even interest in exploring a different solution. This is the plan that Obama, Geithner and Summers want. They are not hoping or trying for something better."

    Parent
    On this subject, approval is only 42% (none / 0) (#4)
    by Inspector Gadget on Tue Mar 31, 2009 at 08:48:25 AM EST
    The percentage of Americans in the new poll who said the country is on the right track still stands at just 42 percent, but that is the highest percentage saying so in five years and marks a sharp turnabout from last fall, when as many as nine in 10 said the country was heading in the wrong direction. Fifty-seven percent now consider the nation as moving on the wrong track.

    so, even some 20% of his supporters think he's doing this wrong.

    That's Funny (5.00 / 1) (#26)
    by daring grace on Tue Mar 31, 2009 at 09:58:22 AM EST
    At first, I thought you'd linked to the wrong page, because I couldn't find the paragraph you cited until I went to the second page of this article, past a rosy headline and several paragraphs of good news for the administration.

    The poll results are curious--perhaps reflecting the ambiguous feelings Americans have about things economic at the moment.

    But along with the sense of the country being on the wrong track that you spotlighted, this poll also includes this:

    Overall, almost two in three Americans, 64 percent, said they have confidence that Obama's economic policies will improve the economy, but that number has dropped since he took office and began to implement his ideas. Before his inauguration, 72 percent were confident that his economic agenda would lead to a recovery. Now, after two months of vigorous debate about his stimulus package and ambitious budget blueprint, confidence has decreased by 13 points among independents and by a similar amount among Republicans.

    I don't know how to reconcile such a large number of people believing the country is on the wrong track with such a large number of people optimistic that Obama's economic policies will improve the economy.

    I guess there may be some nuance involved: As in: "I think we're on the wrong track but some of the president's strategies will probably help a little..."

    Parent

    I suspect that the American people support (5.00 / 2) (#29)
    by DFLer on Tue Mar 31, 2009 at 10:28:24 AM EST
    the stimulus spending side of the package, but distrust the corporate/bank bailout side.  

    Parent
    Stimulating what? (5.00 / 2) (#30)
    by Cream City on Tue Mar 31, 2009 at 10:47:27 AM EST
    I hope that the stimulus works, but the first recipient from whom I've heard emailed me all happy about his ability to employ two people.  That's good -- but further questioning revealed that both are graduate students being employed parttime.

    That's financial aid, which also is worthwhile, but it's not the sort of employment I think we all hope to see:  Fulltime employment of laid-off workers.

    Parent

    I am getting some indications (5.00 / 2) (#31)
    by CST on Tue Mar 31, 2009 at 11:39:17 AM EST
    that the stimulus will go into effect soon from talking to people in my field of work.  The state and city agencies are about to start spending like crazy on transportation projects.

    However, I would like to note that I work in the industry that this stimulus was intended to support (infrastructure) and it is taking way too long - since it still hasn't really started yet.

    A lot of that is due to the fact that the government agencies responsible for the funding are getting all their ducks in line; and there are a lot of rules that go along with the money so that is slowing down the process.

    That's the view from this side of the pond.

    Parent

    On that note (5.00 / 1) (#40)
    by cal1942 on Tue Mar 31, 2009 at 01:43:15 PM EST
    I'm wondering what employment will be available after various infrastructure projects are completed?

    Because of attitudes I'm feeling from this administration and actions to date from this administration, it seems that keeping what we have of our manufacturing base and further strengthening that base is a very low priority if it exists as a priority at all.

    So if the auto industry, as an example, is allowed to die how then will people be employed once the projects are completed and recovery money spent?

    What other parts of the manufacturing base will fall if the auto industry is abandoned and what will people, large numbers of people do for a living?

    In short, I believe we're saving the wrong people.

    Parent

    for us it is interesting (none / 0) (#41)
    by CST on Tue Mar 31, 2009 at 01:58:42 PM EST
    because for years the big dig employed everyone in the state, and then it ended.

    However, it lasted long enough that many people finished their careers with it.

    The word I hear is the spending coming is going to be larger than the big dig.

    So it may last years.  Rome wasn't built in a day... and all that.

    Parent

    When it comes to the working people, (none / 0) (#35)
    by Inspector Gadget on Tue Mar 31, 2009 at 12:54:50 PM EST
    I read this morning that singles will see up to $400 a year, while marrieds will see up to $800 a year in reduced tax deductions from their paychecks (approx $40 a month) to stimulate the economy for the ultra wealthy who will be swallowing up their homes as fast as they can.

    The generosity just never ceases. That's our Democratic congress and administration taking care of the people.

    Parent

    Yes, and I am one of the 20% (none / 0) (#13)
    by BobTinKY on Tue Mar 31, 2009 at 08:58:38 AM EST


    Parent
    Ditto (none / 0) (#39)
    by cal1942 on Tue Mar 31, 2009 at 01:27:31 PM EST
    But not just wrong, grievously wrong.

    Parent
    it's called poker (none / 0) (#7)
    by diogenes on Tue Mar 31, 2009 at 08:52:23 AM EST
    In truth, letting GM and Chrysler go bankrupt with government warrantee backup is viable.  It's hard to let a big bank go bankrupt, and a government nationalization of a bank leaves old contracts intact (as in AIG).

    Of course, there are reasons. (none / 0) (#23)
    by steviez314 on Tue Mar 31, 2009 at 09:42:48 AM EST
    The bondholders are kept whole.  Maybe this is due to pressure from foreign governments/soverign funds that hold financial debt.  Maybe it's because of the implications of a bond haircut on insurance company annuities would cause insurance failures and need an even bigger bailout.  (What if people worry about their life insurance?)

    Another reason is that perhaps the banks are not insolvent.

    Now, BTD, we may disagree about the correctness of these reasons, but they ARE reasons, not nefarious or evil plots.  

    I specifically disclaim nefariousness (5.00 / 1) (#24)
    by Big Tent Democrat on Tue Mar 31, 2009 at 09:48:21 AM EST
    I do demand that the reasons be articulated.

    I am confident they will not stand scrutiny.

    Let me be clear, I want the Geithner Plan derailed. It is a fiasco in the making.

    Parent

    Oppression or regression? (none / 0) (#43)
    by joze46 on Tue Mar 31, 2009 at 04:59:48 PM EST
    You all known it as well as others that this dilemma of a banking problem is a long standing media cover up. The opacity of the media, that is the big three FOX, CNN, and MSNBC knew with full knowledge of the looming crisis. Especially MSNBC, with the anchor, and host Andrea Mitchell, wife of former Federal Chairman Allen Greenspan.

    For heavens sakes this connection with privy knowledge of trillion dollar deals has to be a monumental contradiction in public service. My God a trillion dollar connection where Andrea Mitchell never did any favors for her insider knowledge. Likely GE got some goodies. Now America hears from Bush and Company in the final hours and wants Congress to pony up with a trillion dollars because of a banking credit problem.  Now all this?  Your mind has to be a box of rocks if you think Obama was the creator of this mess.

    But I do think he carries the staff of leadership and metaphorically speaking perhaps the staff of Moses. Surely America does not have the arc of the covenant; the war is not a wining thing to be won when America is going broke and we all know it. It is a quagmire and everyone is in denial.  

    Yet if one thinks about the simple statistical regression pattern of the Bush family from Prescott Bush to Herbert Walker Bush to George Bush one obviously could see the spear or metaphorically the regression staff that plunges through of the Republican Party for its greed that literally pirates tax money from American taxes via the Federal Reserve. With Congressional and Media complicity.

    It's appalling, horrendous, morally wrong and highly and likely in the position that Osama Bin Laden if still alive is likely much happier than Middle America regardless of what happens in Afghanistan or Pakistan. Bin Laden's mission is accomplished.  Isn't it interesting to the news that American capitalism and leadership is not good at this time.    

    "There Are Reasons" | 44 comments (44 topical)

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