The Dumbest Person In Congress
March 24, 2009 7:09 pm

John Cole

This video is just priceless. Rep. Michelle Bachman, easily one of the most embarrassing persons in Congress and also one of the wingnuttiest, spent her five minutes asking inane questions about the Constitutionality of Geithner’s actions:

After about the third time she asked, I would have asked her where in the Constitution it says the desk he is sitting at should be wood. And then asked her to tell me where in the Constitution it says he has to wear clothes.

There are a whole host of things not specifically listed in the Constitution- a wide wide world of government activities- but that doesn’t mean that engaging in those activities is "unconstitutional." Geithner’s actions do not derive their authority directly from something written into the Constitution several hundred years ago, but from the authority that Congress granted him when they passed the respective bills. In fact, the very reason we have things called "Constitutional Scholars" is because everything isn’t spelled out verbatim in the Constitution.

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The Market Mystique
March 27, 2009 10:41 pm

Paul Krugman

.....America emerged from the Great Depression with a tightly regulated banking system, which made finance a staid, even boring business. Banks attracted depositors by providing convenient branch locations and maybe a free toaster or two; they used the money thus attracted to make loans, and that was that.

And the financial system wasn't just boring. It was also, by today's standards, small. Even during the "go-go years," the bull market of the 1960s, finance and insurance together accounted for less than 4 percent of G.D.P. The relative unimportance of finance was reflected in the list of stocks making up the Dow Jones Industrial Average, which until 1982 contained not a single financial company.

It all sounds primitive by today's standards. Yet that boring, primitive financial system serviced an economy that doubled living standards over the course of a generation.

After 1980, of course, a very different financial system emerged. In the deregulation-minded Reagan era, old-fashioned banking was increasingly replaced by wheeling and dealing on a grand scale. The new system was much bigger than the old regime: On the eve of the current crisis, finance and insurance accounted for 8 percent of G.D.P., more than twice their share in the 1960s. By early last year, the Dow contained five financial companies - giants like A.I.G., Citigroup and Bank of America.

And finance became anything but boring. It attracted many of our sharpest minds and made a select few immensely rich.

Underlying the glamorous new world of finance was the process of securitization. Loans no longer stayed with the lender. Instead, they were sold on to others, who sliced, diced and puréed individual debts to synthesize new assets. Subprime mortgages, credit card debts, car loans - all went into the financial system's juicer. Out the other end, supposedly, came sweet-tasting AAA investments. And financial wizards were lavishly rewarded for overseeing the process.

But the wizards were frauds, whether they knew it or not, and their magic turned out to be no more than a collection of cheap stage tricks. Above all, the key promise of securitization - that it would make the financial system more robust by spreading risk more widely - turned out to be a lie......

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CNBC had a great moment this week
March 28, 2009 11:01 pm

Americablog

This is a really important exchange because it cuts to the heart of what is wrong both on Wall Street and in US politics. The US is being fleeced by Goldman (and AIG) who are getting an amazingly good deal for the trash that they had insured by AIG. No matter how you slice it, paying our $50 billion for absolute trash is only good for Goldman. Cuomo should not be the only one chasing this and if we had a real leader at Treasury, this would not be happening. If Obama wants to help the country move past this debacle, Geithner and Summers have to go now. There's no reason why taxpayers should cover full payments for this and let the likes of Goldman walk away unscathed for their past actions.

The sad news here is that the CNBC reporter who called out Goldman and those allowing it is no longer at CNBC. His contract expired or was not renewed.

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The Solution to "Too Big" is Not Bigger
March 29, 2009 9:31 am

Devilstower, DailyKos

The administration is seeking additional power to seize firms involved in the financial problems. Which is fine -- so long as their plan for dealing with these firms doesn't encourage more mergers and buyouts like JP Morgan / Bear Stearns or Whoever / Wachovia. Because, despite the Bush administration defending these mergers as "necessary to preserve the free market," they're neither necessary nor "free."

In fact, the last round of buyouts came with with speacial breaks instituted by then Treasury Secretary Hank Paulson, who rescinded a 1986 rule and provided an estimated $140 billion in tax breaks to grease the skids for mergers. In some cases, the government did more than make it easier for financial institutions to merge. In some cases it played Shadchan for reluctant partners, in others (as with Wachovia) it drove institutions to marry at the point of a fiscal shotgun. So banks that were too big to fail became bigger financial institutions that (like Citigroup) required billions more to keep afloat.

Let's wind back the clock a bit. Remember Smith-Barney, the brokerage that used the slogan "we make money the old fashioned way -- we earn it?" (you can bet no one on Wall Street is using that motto today) In the 1980s, Smith-Barney was already part of an insurance/brokerage mash-up called Primerica. Then Primerica was bought by Commercial Credit, which merged with Travelers Insurance, which bought the brokerage firm Solomon Brothers, which merged with Citicorp to form Citigroup. Fun fact: this was all pre-1999, when the Glass-Stegall Act was still in full effect, meaning that several of these mergers were probably illegal. But instead of enforcing the existing law, Congress chose to pass Gramm-Leach-Bliley, pasting a retroactive smiley face over these mergers and clearing the way for more in the future.

So instead of several smaller companies, we ended up with one behemoth which has collected $45 billion in bailout bucks, in addition to billions more in tax breaks -- $10 million of which is going to spruce up executive's offices.  But why should we be surprised by that, or by the bonuses handed out in AIG? When we gripe about these companies that have become "too big to fail," what we really mean is that they have become too big to be dictated to. They have been provided with such fiscal leverage, such control of the system, that they are too big for the United States government to control.

This is a problem whose coming was welcomed by many conservatives, who have long lived in a Rand-ian dream world where business size is equated to moral worth -- and feared by everyone else at least as far back as Teddy Roosevelt.......

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American Style Capitalism: Tax Joe the Plumber to Give Handouts to Robert Rubin
March 29, 2009 1:09 pm

Dean Baker

The media are busy perpetuating a myth that the United States has been a beacon of "free market" capitalism. This is a lie. The United States never had free market capitalism and certainly the system in place over the last three decades hardly qualifies.

The U.S. put in place policies designed to transfer income from the poor and middle class to the wealthy. This is most evident now with the hundreds of billions of dollars being spent bailing out the banks. For the last three decades, the banks and their top executives, made vast fortunes using a free government insurance policy called "too big to fail," under which bond holders and other creditors could lend money to the banks knowing that the government would honor their debts if they ever got into trouble.

It is an outright lie to call this a "free market." This is a huge government handout. This insurance policy is enormously valuable and the banks did not have to pay a penny for it. The banks are ardent opponents of free market capitalism. None of them have advocated that they be allowed to collapse.

So, the issue over different types of capitalism that is coming up at the G-20 summit is whether the government exists primarily to redistribute money to the wealthy or to serve some other social end.

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Suddenly Krugman
March 29, 2009 4:29 pm

Eric Boehlert

....Looking back on the Bush years, Krugman's track record was rather impeccable. But you'll note he didn't appear on the cover of Newsweek back then. (No "Bush is Wrong" cover lines.) And for years Krugman only occasionally appeared on the pundit talk shows. He wasn't referenced much inside The Village, either. Meaning, the Beltway press pros didn't seem to care what Krugman wrote about Bush and didn't think his writing--his opposition--needed to be examined closer. He was just a liberal critic, so who cared what he wrote about Bush. (That's my take on how much of the press viewed Krugman.)

But now a Democrat is in the Oval Office, Krugman is still hitting the president from the left, and suddenly the Beltway press thinks Krugman's work is fascinating and newsworthy. Trust us, it is. (For years he's been our pick as the country's premier columnist.) We just think everyone would have been better off if the press had paid this much attention to Krugman's work between, say, 2002 and 2006.

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Does Lex Luther Deserve a Bailout?
March 29, 2009 5:22 pm

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