Category: Stupid

Larry Summers in a Nutshell

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CONGRESS PASSES WIDE-RANGING BILL EASING BANK LAWS, the New York Times, November 5, 1999:

“Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century,” Treasury Secretary Lawrence H. Summers said. “This historic legislation will better enable American companies to compete in the new economy.”

And folks who got it right:

“I think we will look back in 10 years’ time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930’s is true in 2010,” said Senator Byron L. Dorgan, Democrat of North Dakota. “I wasn’t around during the 1930’s or the debate over Glass-Steagall. But I was here in the early 1980’s when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness.”

Senator Paul Wellstone, Democrat of Minnesota, said that Congress had “seemed determined to unlearn the lessons from our past mistakes.”

“Scores of banks failed in the Great Depression as a result of unsound banking practices, and their failure only deepened the crisis,” Mr. Wellstone said. “Glass-Steagall was intended to protect our financial system by insulating commercial banking from other forms of risk. It was one of several stabilizers designed to keep a similar tragedy from recurring. Now Congress is about to repeal that economic stabilizer without putting any comparable safeguard in its place.”

So, I’m so glad that Lawrence Summers’ astonishing brilliance and foresight are at the disposal of the President of the United States of America.

Geithner’s* Plan

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So, the plan has been announced, and it’s pretty much what I said over the weekend: A massive subsidy to big investment firms, and the little guy can’t get in on the “3% down and that’s all you lose” deal.

It’s the buy the sh%$pile with taxpayer money thing all over again….and again….and again.

Geithner has an OP/ED in the Wall Street Journal,† where he rolls out the Treasury’s new weasel words for financial toxic waste, “Legacy Assets.”

I’m sure that he thinks of Chernobyl as an “accelerated sunshine facility” too.

We know that the financial masters of the universe love the subsidies, because players like BlackRock and Pimco are falling all over themselves to get in.

I won’t go over the problems with the plan here, you can look at my Saturday post for that, but the short form is that Wall Street is mugging you.

*Really Barack Obama’s plan, because he is where the buck stops, though a lot of the blame goes to Larry Summers too.
†Which, considering the WSJ’s editorial page reputation for outright deception, is utterly appropriate.

Geithner’s New Plan: Same Old, Same Old, Failure

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So, we now have a definitive leak of the features of Geithner’s plan to help the financial system, and it’s the same old, same old: The problem is not that the banks are insolvent, or that their assets are worthless piles of crap, it’s that the markets are just undervaluing them.

The basic provisions:

  • An auction of the big sh#@pile, which is a bad thing, because it only serves to expand taxpayer exposure.
  • The FDIC will lend about 85% of the money to buy this.
    • These FDIC loans will be non-recourse loans, which means that if those assets bought with that particular loan would be used to repay. Any further losses would be eaten by the taxpayer.
  • The Treasury will match, “the private money that each of the firms [4-5 investment firms hired by the Treasury, meaning Goldman and the rest of the usual suspects] puts up on a dollar-for-dollar basis with government money,” which means that the 15% that they have to buy to get the assets is now 7½%
  • The Treasury/Federal Reserve TALF lending program will be used to further expand lending to buy this toxic waste.

This is what Geithner has been pushing for a long time, some sort of program to overvalue assets at taxpayer expense, all while, “firmly against imposing any restrictions on pay for companies investing money in the rescue effort rather than receiving money from it,” except, of course, any participants in this are receiving federal money because of the subsidies.

Dean Baker notes that the that unlike Timothy “Eddie Haskell” Geithner and Lawrence “Shoggoth” Summers and their Evil Minions™, the current market values of the securities are probably accurate, because real estate prices remain 20% above the historical trend, and if houses fall another 20%, these mortgage backed securities now selling for 30¢ on the dollar, which are the very top tranches, would be near a dime on the dollar.

Paul Krugman correctly calls it, “an open invitation to play heads I win, tails the taxpayers lose,” policy, and Calculated Risk and Yves Smith are similarly disparaging, though John Cole is the one who best nails the situation:

The Illness- reckless and irresponsible betting led to huge losses
The Diagnosis- Insufficient gambling.
The Cure- a Trillion dollar stack of chips provided by the house.
The Prognosis- We are so screwed.”

Seriously, tag team of Geithner/Summers may very well be worse for the economy than Hank Paulson.

For your amusement, here is Rep Brad Sherman (D-CA) opening up a can of whup ass on the CNBC Wall Street apologists

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What Prima Donnas

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Well, it appears that Senator Evah Bahy’s (DINO-IN) new moderate caucus is getting some pushback from their constituents, and they are crying like a bunch of “girlie men”, to quote the governator.

It appears that Rachel Maddow covered this, and called them “conservadems”, and they are getting some calls from voters in their states telling them to get with the program.

How many calls are they getting?

Maddow’s five-minute “conservadem” segment last Thursday provoked at least 20 calls Monday to Udall’s office and more than a dozen e-mails to Democratic Party headquarters in Colorado.

So now they are crying about how awful people are to them.

Seriously, these folks are used to obstructing progressive programs, and then getting a pat on the head from villagers inside the beltway, but now, with someone pointing them out as trying to stifle change, they get 20 phone calls and more than a dozen emails, and they are whining about how people are mean to them.

Listen, if you suck up to Wall Street, who destroyed our 401(k)s, and you suck up to large food processors, who put poison in our peanuts, because they contribute to your campaign, you deserve whatever flak that you catch.

Cry me a fracking river.

More Nails in Eddie Haskell’s Coffin

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I think that Geithner will be gone by June….He should have rented a house, because we now have a report that Treasury was informed of the bonuses two weeks before Geithner says that he knew, which makes him either a liar, or incompetent.

Me, I’ll go with liar, as it is clear that the Obama administration is lying their asses off about Dodd’s role in proposed bonus restrictions in the bailout legislation, and the logical people lying about it right now are all on the Geithner/Summers “axis of weasels”:

After the recent furor relating to the AIG payments, lawmakers returned to make a forensic examination of the provision seeking to assign blame for what some called a secret agreement to spare the tottering insurance giant, which has received more than $170 billion in federal aid. The provision and its genesis consumed Capital Hill Wednesday.

“The president goes out and says this is not acceptable and then some backroom deal gets cut to let these things get paid out anyway,” said Sen. Ron Wyden, (D., Ore.), author of an earlier, alternative pay amendment, told the Associated Press.

The Obama administration had not tried to hide its concern about the moves to clamp down on executive compensation. Both Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers lobbied Mr. Dodd to make changes.

Administration officials said the Treasury didn’t suggest any language or say how the amendment should be changed. They said they noted legal issues that could likely lead to challenges, but was the end of their involvement. The official said Mr. Dodd and Congress made the final changes on their own.

At issue were competing provisions in the stimulus bill that capped executive compensation for recipients of bailout funds. One, drafted by Sens. Wyden and Olympia J. Snowe (R, Maine), would have capped bonuses at $100,000, retroactive to 2008. Companies awarding bonuses above that level would face the choice of returning those funds to the Treasury or having them taxed at 35%.

“Administration Officials” means someone under Geithner’s or Summers’ control here.

What’s more, the rest of the world does not have any confidence in Geithner either, as evidenced by the IMF criticizing his plan as “lacking detail.”

The IMF never criticizes a Secretary of the Treasury, and the fact that they are now indicates that there are a number of foreign nations that are sick of him, and signed off on this statement.

We need someone who will hold the financial industry to account, and Geithner still has knee pads on.

FASB Moves Toward Giving Lunatics Control of the Asylum

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Financial Accounting Standards Board (FASB) looks to have caved, and its moving to significantly weaken mark to market accounting.

This is very bad news in the long term, and, because, “would be able to apply the revised rule to their first-quarter financial statements,” we are going to see a bunch of very rosy results from the banking sector, but this will all be lies.

This is a bad move.

Not Enough Bullets, AIG Yet Again

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This time it appears that AIG is paying either $165 million, or $450 million to senior employees of their financial products division, the one which bankrupted the firm through their credit default swap (CDS) business.

It appears that the treasury, who, you know, manages AIG on behalf or the taxpayers, who now own of 80% of the bankrupt in everything but name only firm, were told by AIG president Edward Liddy that these were contracts, and so they had to honor them:

[Obama economic guru Larry] Summers said the government would examine its options, but he acknowledged it might not be able to terminate prior bonus agreements.

“We are a country of law. There are contracts. The government cannot just abrogate contracts,” he said in an interview Sunday on ABC’s “This Week.”

AIG is already scheduled to pay $121.5 million in incentive payments for 2008 to senior executives and 6,400 of its employees. And AIG is laying out another $619 million for 2009 in retention payments to more than 4,000 employees.
Total expected payments amount to almost $1.2 billion.

Somehow, the contracts signed with auto workers must be renegotiated, but those signed with failed and incompetent financial executives must be supported.

Seriously, the US government claim of impotence in the face of a contract is a reflection of the fact that Mssrs. Summers and Geithner are creatures of the corrupt financial industry on Wall Street, and cannot see beyond this.

If I had to choose between Vladimir Lenin and Timothy Geithner at Treasury, I would be very hard pressed to choose.

We Forgot How To Make Trident Missile Warheads?

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It appears that someone neglected to properly record how to make a super-secret, and highly toxic, substance called “Fogbank”, which is thought to be a, “thought by some weapons experts to be a foam used between the fission and fusion stages,” of the warhead.

Not only was the old facility to make Fogbank demolished, but, “Vital information on how Fogbank was actually made had somehow been mislaid”, or perhaps never recorded, because the stuff is so super-secret.

Un-dirtyword-believable.

Unencumbered by the Thought Process

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The EU is continuing to push finance deregulation in third world:

While EU and other global leaders have talked tough about re-regulating the financial sector in the wake of the economic crisis, they remain committed to pushing through banking deregulation in the developing world via trade deals.

This strategy is undermining poverty reduction in these countries and is reproducing the same type of circumstances that led to the crisis in the first place, warns a new report published on Wednesday (11 March) by the World Development Movement, an UK-based anti-poverty NGO.

Someone needs to whack these jokers upside the head with a clue stick.

UN Discovers that Its War On Drugs Fueled the Drug Cartels

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Anti-narcotics drive fuelled drug cartels: U.N. | International | Reuters:

A U.N. anti-narcotics drive has backfired in part by making drug cartels so rich they can bribe their way through West Africa and Central America, U.N. crime agency chief Antonio Maria Costa said on Wednesday.

The 10-year “war on drugs” campaign had cut drug output and the number of users, he said. But it had a “dramatic unintended consequence” — profit-gorged trafficking gangs destabilizing nations already plagued by poverty, joblessness and HIV-AIDS.

Hoocoodanode?

You mean that increasingly draconian strategies against illegal drugs increases the profit margin for the suppliers who survive, which gets them more sophistication, and influence, and increases corruption and violence in society?

They could have just asked Al Capone’s ghost, and he would have told them that.

What is Shinseki Thinking?

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It appears that Eric Shinseki is considering billing veterans’ private insurance companies for the treatment of service related injuries.

I don’t think that this is an attempt to bill veterans, just extract more money from their insurers, but it’s a very bad idea:

  • It means that they will fight their insurance companies over billing.
  • It raises the costs of employers of hiring disabled vets.
  • It is the first step on a slippery slope to privatizing VA care.

Put a stake through its heart now.