Guest Post by Richard Vague: Should We Bail Out Large Corporations?

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Richard Vague was co-founder and former CEO of First USA Bank and former CEO of Juniper Financial. He also publishes Delancey Place. Richard Vague recently spoke at the New America Foundation on the connection between the Iraq War, high oil prices, and what was happening to the US. economically. Here is a shorter clip.
Over the last several months, and especially the last few days, we have seen the Federal Government intervene in unprecedented ways to rescue or help rescue some of the largest financial institutions in our nation. This intervention has been unpredictable and has taken several different forms. The government has acted to save certain institutions–Fannie Mae, Freddie Mac and AIG. It has assisted in arranging a takeover–Bear Stearns. And it has walked away from Lehman and allowed it to fail.
In some cases it has tried to preserve some value for existing shareholders or managers, in others not. While the government officials involved have outlined some guiding principles, their actions seem to indicate that the government is improvising rather than acting from any firm set of guideposts.
I’ll let others more familiar with the details debate whether the specific structures of the above-mentioned rescues were appropriate. What I’d like to discuss instead is whether in general it is good policy for our government to intervene to rescue businesses, or whether instead government should stand aside and let each of these institutions fail. My answer will lie somewhere in between.
I subscribe to the view that most bailouts of businesses are unnecessary and bad policy.
Many applauded when the government bailed out Chrysler in 1979, but since that time, U.S. automakers’ share of world markets has declined from almost 80% to 45%, causing some to argue that the comfort of the bailout allowed GM and Ford to avoid the hard decisions that would have allowed them to truly compete at the level of a Toyota. And the propped-up Chrysler has remained a sickly also-ran even to this day.
But in a market nosedive, financial institutions and the liquidity they provide serve a unique and crucial role. This can be illustrated by the widely-remembered failure of Bank of United States during the Great Depression. It was allowed to fail, setting off a nationwide run on banks.
A key consequence was that many of its borrowing customers, small businesses that required working loans to operate, lost their loans from the Bank of United States and therefore failed too–even though they were solvent and ran credit-worthy businesses. For every one dollar of capital that a bank has, it can make about ten dollars in loans–with a multiplying effect on lending that is inherent to banking. But when a bank fails, and in the resulting chaos some of its loans to customers are curtailed, called or cut-off, this multiplying effect works in reverse and jobs and business activity can dramatically contract.
Financial institutions can fail even when they are profitable and have adequate capital–if they lose their own funding, either through a “run” on their deposits or if their own lenders call or do not renew their loans to that institution. In these cases, a lender of last resort can rescue that financial institution simply by supplying the missing funding until it can be restored. In this type of case, the consequence of failure on business activity are of course the same.
So rescuing lending institutions is critical. But my view is that the critical part of these institutions to preserve is the loans and other credit extended to worthy borrowers. And just because you are rescuing that part of a financial institution, it does not follow that you also have to rescue the shareholders of that institution or the senior management of that institution. Where the rescue is necessitated because of losses I would argue that you don’t. And it does not mean that in due time you cannot sell or auction off the assets or components of that failed institution to other, stronger institutions. Where the rescue is necessitated because of losses I would argue that you should. But in today’s world, with very complex lending instruments and derivatives thereof, it requires careful administration to make sure that credit is not inappropriately contracted so as to further damage the economy. And that takes the time that a rescue can deliver.
In the periodic financial crises that have occurred in the U.S. and Europe since the onset of the industrial age, damage has been more successfully contained and recovery has come more quickly when there has been a large institution or institutions to step in and provide liquidity to prevent financial institution failures and “runs.” Institutions that have played that role in the past have included the quasi-governmental Bank of London, the old JP Morgan Bank, the New York Clearing House banks acting in concert, and more recently, the U.S. Federal Reserve Bank.
Where the leading institutions have not decisively played that role during a panic, consequences have been severe–the best example being the Great Depression itself.
— Richard Vague

Comments

40 comments on “Guest Post by Richard Vague: Should We Bail Out Large Corporations?

  1. Kathleen says:

    Blame it on the dentist…where I spent 2 hours this a.m. Linda.. Reagan may have convinced some people all taxes were bad, but while he vastly lowered taxes for the top 52% from 97 to 38%, he raised taxes on the bottom tier from 10 to 15%….yet he is hailed as the great tax cutter….slick….I have been begging Demz to cut taxes from the bottom up, raising the standard deducution, which hasn’t been raised since Reagan, to a “livable income”‘ and index it to the cost of living….even so,, it wouldn’t come close to the tax cuts given to the top….they could lower the rate back down to 10%… especially since the top have gotten the Bush cut and want it to be permanent…..I’m very disappointed Demz don’t address this, but instead talk some mumbo jumbo,, adding up to a qhopping $1,000 savings for some families….whoppie….all we get is coupon economics, little gimmicks and rebates, but no real policy changes.
    DonS…I’m still major bummed Hillary isn’t on the ticket….not that I don’t like Biden, I do, but because she got 18 milliom votes, so I thought it would make the strongest ticket…it’s not often that a primary race is so close…party unity seemed like a vital component of winning…. I’ve stopped bellyaching about it because I’m unenthused about the whole circus now… it’s beyond absurd…..while Dopey and Darth are still at the helm, anything can happen….
    I do like Obama’s proposal to eliminate taxes for seniors making less than $50,000…he should make a cheap flyer with just that fact on it and take it to every senior center on the planet….you could skip the whole rest of the diaplogue… that fact alone would win most seniors, watching their retirement funds dissolve into a big nothingness…..
    Tally Ho

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  2. Kathleen says:

    ooops captcha…this one is proof read.

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  3. Kathleen says:

    Linda.. Reagan may have convinced some people all taxes were bad, but while he vasis at all, but instead talk some mumbo jumbo adding up to a whopping $1,000tly lowered taxes for the top 52% from 97 to 38%, he raised taxes on the bottom tier from 10 to 15%….yet he is hailed as the great tax cutter….slick….I have been begging Demz to cut taxes from the bottom up, raising the standard deducution, which hasn’t been raised since Reagan, to a “livable income”‘ and index it to the cost of living….even so,, it wouldn’t come close to the tax cuts given to the top….they could lower the rate back down to 10%… esepcially since the top have gotten the Bush cut and want it to be permanent…..I’m very disappointed Demz don’t address this, but instead talk some mumbo jumbo,, adding up to a qhopping $1,000 savings for some families….whoppie….all we get is coupon economics, little gimmicks and rebates, but no real policy changes.
    DonS…I’m still major bummed Hillary isn’t on the ticket….not that I don’t like Biden, I do, but because she got 18 milliom votes, so I thought it would make the strongest ticket…it’s not often that a primary race is so close…party unity seemed like a vital component of winning…. I’ve stopped bellyaching about it because I’m unenthused about the whole circus now… it’s beyond absurd…..while Dopey and Darth are still at the helm, anything can happen….
    I do like Obama’s proposal to eliminate taxes for seniors making less than $50,000…he should make a cheap flyer with just that fact on it and take it to every senior center on the planet….you could skip the whole rest of the diaplogue… that fact alone would win most seniors, watching their retirement funds dissolve into a big nothingness…..
    Tally Ho

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  4. DonS says:

    Linda on Wig Wag: “I really like many of your comments, but I do find it annoying, if not insulting, when you revert back to the endless continuation of the Democratic primary race and your distorted interpretation of it, as in the next to last paragraph of your post this a.m.”
    Hammer, meet nail. Only no one, but no one, can beat Wig Wag when it comes to rhetoric and factoids.
    Too bad s/he can’t get that dissapointed Hillary (and Bill) supporter lens removed.
    Wig Wag, you would be dynamite if you trained your laser on the current villains.

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  5. JohnH says:

    “But Clinton supporters don’t care because they really don’t care about anyone except themselves and members of the business class (with whom they do everything). They are not interested in poor people and they are not interested in working people. Actually Clinton supporters have as much disdain for these people as their candidate does. They love Clinton because when they look at her, they see reflected in the candidate their own shallow, materialistic, selfish and nihilistic life styles.”
    Wow! It’s easy to bloviate. No facts, no figures. Just raw hyperventilation. Cut, paste, and change a couple words. Recognize any of this, Wigwag?

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  6. Linda says:

    WigWag,
    No point in continuing this because your logic is flawed, and you jump all over the place. Sure FDR was/is great, but in 1930s neither Hillary nor Clinton could have given any FDR speech. Women and African-Americans could vote, but it was easier for Caucasian women than African-American men and women. FDR would not have been nominated for any position if he were African-American.
    Also inbetween you had Reagan who persuaded the working class that all taxes were bad and didn’t make things better for them at all, but they still believe it after a quarter century of being told that by both parties. So now they believe it, and people laugh when Biden says paying taxes is patriotic.
    And none of the politicians of either party during an election are going to tell the people the truth that they will be taxed by printing of money and inflation, etc. as a result of this.
    You and I agree on a lot, but we aren’t going to agree about Obama v. Clinton. I have stated openly that I didn’t like the way both Clintons botched health care reform in 1993-94 because I thought it would delay reform for 20 years. Now I don’t think we have the funds to pay for health care reform. So I am even more angry about that.
    I have no idea where Hillary stood on welfare reform, but it was not with Marian Wright Edelman and Peter Edelman. I don’t know if Hillary was against Gramm-Leach-Biley or not. So I have no idea what was in her head or what she said to Bill. Those are not things FDR would have done.
    You seem to know what Obama thinks and believes as well as Hillary. I have no idea what either of them really think.
    And be my guest at having the last word on this thread because I’m busy the rest of this week and don’t intend to keep debating with you.

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  7. questions says:

    Re “effete” — the OED has it as “more recently effeminate” which is the meaning I was responding to. Etymologically it’s related to fetus — unable to be effective or strong. That weakness is then related to being emasculated and hence the shift in meaning. So I suppose we’re both right on this.
    I kind of doubt that dems look at who is supporting a candidate and then say “Whoa, not for me! THAT person has working class appeal.” What people do, I’m guessing, is get a sense of some basic policies (pro-choice and the like), demeanor (Biden’s running mouth), political connections (HRC’s relationship to WJC) and probably a bunch of other stuff and then vote.
    And, indeed, Obama has plenty of working class appeal, union support, women’s support, Latino support, African-American support (of course none of these people is working class….) Oh, and a fair amount of the youth vote (those who don’t think Palin is soooo cute). What he’s missing are evangelicals, Appalachia, and the people who are convinced he’s a Muslim, or who can’t get over the race issue (plenty of those). He may pull in some moderate Repubs who are disgusted with Palin and McC. So your whole issue isn’t really an issue. It’s Appalachian voters who may well be more racially motivated than class-motivated who seem to be thinning the leads in PA….
    Bill Clinton is a deal breaker for me. Kucinich’s complete unelectability and the UFO were issues. Biden’s iffy in a range of ways. Conservative governors turn me off (Isn’t Rendell anti-choice? I actually don’t know any longer.) Obama is an attractive choice because he’s smart, he consults a wide variety of people — he’s got what one could call a METHOD of decision-making that goes completely counter to McCain’s. And that method is pretty politically satisfying. It’s not class. It’s thoughtfulness and a reasonable range of policy positions.
    If you think that woking class people can’t identify with someone who THINKS before he speaks, then maybe you’re the one with the class bias???? Why is an effete guy (in any sense of the word) so awful? Is it testosterone levels? If so, then HRC lacks. Is it commitment to issues that will bring good things to workers? Well, NAFTA CAFTA Right-to-Work states (isn’t Arkansas a right to work state?) — not so good for workers. (Look up Alexander Cockburn for endless critiques of Clinton.)
    But anyway, you’re infatuated with the Clintons and I’m not.
    And could you just define “class” for me? Is it affect? Income? Education? Intangible? Control over work hours? Benefits? Number of countries visited? Choice of beverage and transpotation? Skin color? (Let’s face it, African American WORKING CLASS people support Obama.) Testosterone levels? Ability to wield a hammer? Love of football?
    Provide the income numbers and let me know. What’s upper middle? Middle? Working? Poor? Can you marry some money, make very little and still count as poor? If two people who each make 40K marry, are they upper middle as a couple? What if someone makes 200K and has HUGE medical expenses? What if you’re a well-educated community worker who makes 25K? Define your terms!

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  8. WigWag says:

    Linda, one more thing I forgot to mention. You said
    “A lot of the attraction of Obama’s message to many of us is our desire to have our society move beyond that kind of thinking.”
    Obama’s pretensions to a new kind of politics and his supporters longing for it, are what I like about Obama least. I don’t believe we need a new kind of politics. I think we need alot more of the old kind of politics; politics like it was practiced by Franklin Roosevelt.
    I believe this country would be much better off if we had presidential candidates who could utter words like the words Roosevelt uttered in his 1936 speech announcing the New Deal:
    “They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.
    Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me–and I welcome their hatred.”
    That speech was one of the most remarkable speeches ever given by an American President. It is particularly timely today. It’s not that I expect that Hillary Clinton would ever give that speech but she comes alot closer to it than Obama.
    Obama is the anti-Roosevelt. He just wants us all to get along. Of course he does, that would be best for the wealthy and upper middle class Democrats who support him.
    But Obama’s lets all get along mentality isn’t necessarily good for the rest of us. And he’s accomplished anything to suggest that he cares about anyone but his elite patrons.

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  9. WigWag says:

    “And if you think that Obama supporters who are middle class and professional don’t suffer discrimination, especially women trying to get tenure or equal pay at universities, for example…”
    I agree, Linda. But it’s ironic, don’t you think, that these same women would support an unqualified man over a qualified woman for an office like, lets say, President?
    “And it is possible to be a working class poor person who saves his/her money by not doing any of those things in order to buy standing room only tickets to the Metropolitan Opera.”
    Yes, that’s true. That was me for many years I am a huge opera fan.
    “You can think and say this same mantra over and over all you want, but it detracts from the better comments you make.”
    Well, Linda I am flattered that you think any of my comments are “better”. But I do think class matters. And I do think that upper middle class Democrats are happy to partner politically with working class Democrats as long as the working class Democrats understand that they are the junior members of the partnership.
    That’s why the candidates supported by the upper middle classes (like Obama, Kerry and Dukakis) usually secure the Democratic nomination. The problem is, most of the time they lose. Working class Americans (Reagan Democrats) are happy to vote Republican instead of playing a subservient role to their erstwhile Democratic brethren.
    If you have a better explanation for why Democrats lose year after year I would be happy to hear it. You know my thesis; Democrats nominate candidates who can’t win like Dukakis, Kerry and Obama instead of equally good candidates who can win like Rendell, Strickland, Biden, Richardson, Hillary Clinton, etc. Being supported by working class voters is a virtual deal breaker for a candidate with upper class Democrats.
    The only reason Obama has a good shot this year is because we are in uniquely bad economic times. But this too shall pass. When it does the Democrats will follow the lead of their upper middle class and even wealthy supporters once again and nominate another candidate like Obama. That candidate will go down to the same ignoble defeat that Democratic candidates always do.
    Deny it if you want to. But your denial results in Republican victories in election after election (the results of this election notwithstanding.)
    And one last question, Linda. Do you really think upper middle class “knowledge” workers are any less pretentious than the country club republicans they love to criticize?

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  10. Linda says:

    Many poor and working class people do support Obama.
    And if you think that Obama supporters who are middle class and professional don’t suffer discrimination, especially women trying to get tenure or equal pay at universities, for example, you are mistaken—and you are basing your arguments on the same “buzz-words” that divide people who should be on the same side as well as dividing people by party.
    A lot of the attraction of Obama’s message to many of us is our desire to have our society move beyond that kind of thinking.
    It is possible to shop at Whole Foods and drive there in a 15 year old Corolla. It is possible to prefer Charles Shaw chardonnay to beer because one doesn’t like beer or even to not like to drink alcohol at all. It is possible to like coffee and never go to Starbucks. And it is possible to be a working class poor person who saves his/her money by not doing any of those things in order to buy standing room only tickets to the Metropolitan Opera.
    Your logic is flawed. That’s all I’m saying. Those are your emotions that I find little different from a few people I know who say they just don’t like Obama…ask them why…they fumble and stumble…and maybe one will then say, “Well, he’s African-American.”
    You can think and say this same mantra over and over all you want, but it detracts from the better comments you make.

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  11. WigWag says:

    Questions, here is the definition of effete from Webster’s Dictionary:
    –adjective 1. lacking in wholesome vigor; degenerate; decadent: an effete, overrefined society. 2. exhausted of vigor or energy; worn out: an effete political force.
    There is no reference to anything pertaining to sexual orientation in this definition as far as I can tell. So your reference to homophobia makes no sense to me. And of course the three candidates I called effete, Dukakis, Kerry and Obama are not gay (as far as I know).
    As for S2433 don’t you think it’s a little premature to call something an accomplishment before it’s been passed and signed into law? I will look forward to that list of items that have actually been enacted and helped real people in their daily lives.
    And I think it’s great that the people you know are willing to pay higher taxes for better social programs. I think it’s quite noble that they are desperate for better public schools. The fact that they support a better health care system is also quite laudable. But if they really care about those things, why couldn’t they bring themselves to vote for one of the candidates who actually had a track record of making some of those things happen. If they didn’t like Clinton, that’s fine. They could have voted for Biden, Dodd or Richardson.
    Their decision to vote for the least competent and capable person is compelling evidence that what you say just isn’t true. If Obama supporters really cared about the issues you say they support, they wouldn’t have voted for Obama in the first place.
    Obama is the perfect metaphor for everything the “knowledged” classes represent. He exemplifies form over substance. He represents privilege over hard work (despite his faux Horatio Alger story). He pretends to be progressive but relies on bigotry for his success. And he is supremely comfortable around people who are like him and disdainful of people who aren’t like him. So disdainful in fact that he was caught in San Francisco saying what he really thought. And like his brethren in the “knowledged” classes he is a hypocrite. You remember, one week he was telling us how he could never repudiate Reverend Wright. What did he do one week later? He repudiated Reverend Wright.
    In many ways Barack Obama is reprehensible.
    But you and I do agree about one thing. He is less reprehensible than McCain and the prospect of a Sarah Palin Presidency makes Obama look a little like George Washington. Even to me.

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  12. questions says:

    WigWag, here’s the first of a series for you…
    S.2433: A bill to require the President to develop and implement a comprehensive strategy to further the United States foreign policy objective of promoting the reduction of global poverty, the elimination of extreme global poverty, and the achievement of the Millennium Development Goal of reducing by one-half the proportion of people worldwide, between 1990 and 2015, who live on less than $1 per day.
    Of course, Obama doesn’t care about poverty….Oh my.
    http://obsidianwings.blogs.com/obsidian_wings/2008/09/compare-and-con.html
    A small list of Obama’s accomplishments. As I find more, I’ll post compilations. I come across such lists frequently. He does have a record. And he does care about more than chardonnay and Starbucks.

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  13. questions says:

    WigWag,
    I have to say that the “effete” comment is bordering on homophobia, the class resentment is typical if astounding (you bash Obama for the “clinging” comment but you keep tossing out chardonnay and Starbucks).
    Try defining “working class” — is it imbibing habits, income, brand of car? You toss “Prius” the way Reagan tossed “Cadillac”, you toss “Starbucks” without realizing, once again, that PLENTY of secretaries drink Starbucks on the way to work — it’s a “cheap” luxury.
    Please try to rethink your discourse. Obama has a reputation in Illinois for sitting with farmers in their kitchens, listening patiently and with understanding to their issues. Are farmers “working people?” Obama sat in THAT church with plenty of “working people.” Obama spent time in childhood on foodstamps. What more “working people” do you want?
    And WigWag, remember, George Bush was a GREAT candidate as was Reagan — they both won re-election!!!!!!!!!!!!! Great candidates don’t always make great presidents. And who knows what “lesson” the dems will take away. Maybe the nation’s choice of candidate will change. Maybe we’ll all GO GAY!!!!!!!! Maybe we’ll get so EFFETE that we pick a woman!!!!!!!
    “But Obama supporters don’t care because they really don’t care about anyone except themselves and members of their own class (with whom they do everything). They are not interested in poor people and they are not interested in working people. Actually Obama supporters have as much disdain for these people as their candidate does.”
    The above quotation does not describe a single person I know. Obama supporters are willing to pay higher taxes for social programs, are desperate for better schools, city services, an end to a war that has killed as many as 1.4 million Iraqis (dead Iraqis don’t affect me directly, have to admit it. But somehow I CARE ABOUT THEM. HUH. Not in my “class”, not my ethnicity, and yet I CARE….. SHEESH) Obama supporters want broad health care even if they have work place health care already. Hmmm. Obama supporters want workplace safety rules even if they don’t work in factories. Hmmm. Obama supporters want legalized safe and accessible abortion services, even though many of them are men and women who have easy access to reproductive services. Hmmmm.
    In short, Obama supporters are quite capable of thinking about people not in their “class” and there are PLENTY of working class people supporting Obama.
    (By the way, my number list was an oblique reference to McCarthy.)
    (And Geo. Bush and John McCain have long long long resumes. Funny, it isn’t just the resume.)

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  14. JohnH says:

    I have to laugh at how low the comments have descended. Because I criticize the Clintons on their support of NAFTA, PNTR, WTO, GLB, and CFTC–all laws designed to advance corporate greed at the expense of working Americans–I “have as much disdain for working people as Republicans do” and am setting “a sexist standard against Hillary Clinton.”
    You can’t make this stuff up!
    Like Will Rogers once said, “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”
    It’s the only explanation I can find for the views of people like Wigwag and MarkL, who absolutely refuse to acknowledge the devastating consequences of Clintons’ support of NAFTA, PNTR, WTO, GLB, and CFTC.

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  15. Kathleen says:

    MarkL…I’m with you on Reagan being a major culprit in this economic meltdown…when he dismantled FDR’s graduated income tax, he created downsizing, outsourcing, recession and homelessness…he was palpably anti-labor and unions. and then we had Iran-Contra…abolishing all sorts of regulation, starting with the air-traffic controllers, was the crux of this problem and could also be said to have been what made 9/11 possible….surely better qualified air-traffic controllers would have noticed what was happening more instantly….banking regulators would have seen this one coming long before it reached this point.
    Frankly, I find the term, :”Reagan Democrat” an oxymoron… no self respecting Democrat could support such an anti-labor person as Ronald Reagan….

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  16. WigWag says:

    Linda, I am just saying what I think, like everyone else here. As for the investment/trading strategies of Obama supporters, I haven’t a clue. I hope for their sakes that whatever financial strategies they adopt are more sophisticated than their political strategy.
    As for your suggestion that my comments about Obama supporters are biased because I don’t know all Obama supporters, I think that it a little much. Unlike racial, ethnic or religious categories, Obama supporters aren’t in a “protected class.” And unlike poor people and working class people, Obama supporters aren’t discriminated against merely because they support Obama.
    Criticizing Obama supporters is exactly like criticizing Republicans or conservatives, or neoconservatives. Folks who criticize them don’t know every member of those entire groups either. But you don’t object when they’re criticized.
    The entire Obama phenomenon is bad and destructive in so many ways that it’s hard to recount them all (but I do my best).
    But Obama does have one extremely important thing going for him that makes him deserve our votes. He’s not McCain. And most importantly, he’s not Palin.

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  17. Linda says:

    WigWag,
    I really like many of your comments, but I do find it annoying, if not insulting, when you revert back to the endless continuation of the Democratic primary race and your distorted interpretation of it, as in the next to last paragraph of your post this a.m.
    Such writing is as biased as any racist or sexist comments. You are unfairly attacking and characterizing an entire group of millions of people whom you don’t even know.
    That is prejudging and unfairly judging and thus prejudiced.
    By the way, did Obama supporters who are so rich and elitist also have fun in the past week selling short in the market and now are buying gold and Canadian dollars?

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  18. WigWag says:

    You forget, MarkL that Clinton derangement syndrome is now a disease of the so called left instead of the right. The right has moved on but the so called left is as disturbed as ever.
    Of course, these folks are not really on the left, they just pretend that they are. People on the left care about working people and poor people. Many of the fauxgressives supporting Obama just care about validating their own life styles which really aren’t that different than the life styles of country club Republicans they pretend to hate.
    Sure, they proudly drive their Priuses to Whole Foods instead of driving their Lincolns to the country club. Sure, they enjoy their chardonnay instead of martinis. Sure, they vote for the candidate they want to go to Starbucks with instead of voting for the candidate they want to sit down and have a beer with.
    But make no mistake, MarkL, Obama supporters are, by and large, as reprehensible as the conservative republicans they think they are better than.
    And MarkL, their dumb too. If Obama wins, they will take home the wrong message. They will see it as vindication. They will think it demonstrates that Obama was a good candidate after all.
    But of course, nothing could be further from the truth. They will conveniently forget that Obama ran in an election where the trends were more powerfully Democratic than at any time in a generation (since Carter replaced Nixon). They will also forget that Obama is running to replace a uniquely unpopular President. And they will never attribute Obama’s victory to the fact that he ran during a time that the financial system (Wall Street) and the economic system (Main Street) was as fragile as at any time since the great depression.
    Most importantly, they will forget that despite all the advantages that Democrats have, Obama was losing before the stock market tanked.
    The sad result of all of this is that Democrats will feel free to continue to nominate effete, elitist candidates like Dukakis, Kerry and Obama who have as much disdain for working people as Republicans do. They will continie to nominate candidates who either feel comfortable insulting working people or ignoring them. And they will continue to nominate candidates for whom community organizing is merely cover for pushing the interests of wealthy benefactors.
    And while it may work this time, it won’t work next time. It’s called regression to the mean. As soon as times return to something approximating normal, politics will also return to normal. That unfortunately means electing three republican presidents for every democratic president.
    But Obama supporters don’t care because they really don’t care about anyone except themselves and members of their own class (with whom they do everything). They are not interested in poor people and they are not interested in working people. Actually Obama supporters have as much disdain for these people as their candidate does. They love Obama because when they look at him, they see reflected in the candidate their own shallow, materialistic, selfish and nihilistic life styles.
    So MarkL that’s why Obama supporters hate the Clintons as much or more than right wing Republicans. Underneath the thin veneer, fauxgressive Obama supporters are exactly like right wing republicans. The only difference is that when they go to the supermarket they tote their food home in cloth bags not paper or plastic.

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  19. MarkL says:

    questions,
    Actually my point is that JohnH is cracked: He proposes a sexist standard against Hillary Clinton, while neglecting to point out that Obama offered far less in these areas as a candidate than Hillary did.
    And then Obama chose Biden, which ought to remove all doubts about Obama’s allegiance to the finance sector.
    Has Obama ever pointed out that Reagan is the one who started driving the US over a cliff through suicidal economic policies? Not that I recall. Clinton, of course, managed to undo some of the damage.
    Why is blaming Clinton so important? Especially, why blame him for the repeal of the Glass-Steagall act, since that passed Congress with a veto-proof margin.
    Let’s place blame where it belongs, which is with Reagan and the Republicans, and not Clinton.

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  20. WigWag says:

    Questions if you have a list of 25 or 29 or 35 accomplishments of Obama you have never shared it. I’d be happy to see it, especially if you can come up with 25 substantive as opposed to rhetorical accomplishments. Heck, if you could come up with 10 legitimate accomplishments I might actually be able to feel good about voting for him. Right now, I’ll vote for him and then take a 4 hour shower. And even that won’t make me feel better about voting for a person of his bad character. But at least I’ll be able to take solace that he’s not McCain and we won’t have to worry about Palin.

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  21. questions says:

    MarkL,
    Near as I can tell, Obama’s praise for Reagan isn’t really praise — it’s an acknowledgment that Reagan altered public discourse. Reagan was EFFECTIVE. “Effective” doesn’t mean beneficent; it means able to get something done. Reagan certainly did stuff, and he did it with a range of rhetorical tools, inside baseball, soft and hard power that is pretty astounding. I did not like the results of Reagan’s policies, but, again, he was an effective agent in the world.
    And on the endless Clinton-is-great, Obama-is-crooked or Obama-is-great, Clinton-is-a-Republican-in-sheep’s-clothing thing, it’s probably just not worth going into anymore. WigWag has a list of 25 or 29 or 35 things Clinton did, so do I….. Whatevah.

    Reply

  22. JohnH says:

    MarkL–After the major sell-outs that Clinton perpetrated on the American people during his tenure (NAFTA, PNTR, WTO, GLB, and CFTC), why would I trust Hillary? I have no doubt as to where her loyalties lie. I give Obama the benefit of the doubt until proven guilty.
    Impressive list, Wigwag. But on issues having systemic impacts on the economy and the well-being of Americans, Clinton was an unrepentant sell-out. I give him credit for balancing the budget by taxing high incomes. But once that good deed was done, he descended quickly into craven behavior that far outweighed the good he did by balancing the budget.

    Reply

  23. MarkL says:

    JohnH,
    Are you saying you trust Obama, who lauds Reagan to the skies, more than Hillary Clinton??
    Reagan is the one who is responsible for ruining this country, more than anyone else.

    Reply

  24. WigWag says:

    John H:
    Short list of some of the things Clinton did for working people while he was President:
    1)Raise taxes on high income tax payers
    2)Fight for universal health care (a fight he eventually lost).
    3)Pass Family Medical Leave Act.
    4)Put 100 thousand more police on the streets.
    5)Dramatically increase aid to education.
    6)Double the size of medical research funding through the NIH.
    7)Appoint outstanding members to the National Labor Relations Board.
    8)Appoint Supreme Court justices who supported workers rights.
    9)Expand length of unemployment insurance which helped unemployed workers who lost their jobs due to George H.W. Bush recession.
    10)Pass effective economic stimulus package that ended George HW Bush recession.
    11)Balance Federal Budget
    12)Brilliantly handle Asia/Russia/South America financial crisis in a way that prevented a recession in the United States.
    13)Clinton signed the Brady Bill at great political peril to himself.
    14)Clinton dramatically expanded the Earned Income Tax Credit.
    15)Clinton increased the minimum wage three times.
    Economic Results During Clinton Administration:
    1)22.7 million jobs were created during the Clinton Presidency. The most in history.
    2)Productivity increased more under Clinton than any President in the preceding 40 years. Productivity growth averaged 2.4 percent per year.
    3)When Clinton took office the budget deficit was $255 billion. When he left office he left a budget surplus of $559 billion.
    4)When Bill Clinton took office GDP was $6.657 billion. When Bill Clinton left office, GDP was $10.128 billion.
    5)Dow Jones Industrial Average when Clinton took office was 3710. Dow Jones Industrial Average when Clinton left office was 11,600. Amazingly, the Dow Jones Industrial average today is about where it was when Clinton left office 8 years ago.
    Barack Obama’s Accomplishments:
    Providing political cover for slum lords abusing tax incentives in Chicago.
    Was NAFTA a mistake? Yes. Does it pale in comparison to these other accomplishments? Yes/

    Reply

  25. JohnH says:

    Wigwag–how would you characterize someone who shows no remorse for selling the American economy down the drain by signing NAFTA, PNTR for China, CFTC and Gramm-Leach-Blilley?
    Absolute and unrepentant scoundrel pretty well sums it up.
    Someone who supports a presidential candidate who refuses to repudiate such behavior by her husband looks pretty gullible.

    Reply

  26. WigWag says:

    Mr Vague says “And just because you are rescuing that part of a financial institution, it does not follow that you also have to rescue the shareholders of that institution…”
    This from the New York Sun, By ROSS GOLDBERG, Staff Reporter of the Sun | September 22, 2008
    “New York City’s pension system appears to have lost about $230 million since June from the collapse of Lehman Brothers, Merrill Lynch, and American International Group, increasing the strain on taxpayers after a year in which the funds already took a $6 billion hit.”
    So who exactly does Mr. Vague think these shareholders are? Were school teachers, police officers, firemen and transit workers complicit in all the problems faced by Wall Street? Why exactly does he think they are any less worthy of protection than lets say high income tax payers?
    According to the US Treasury, in 2005 (the most recent year that data is available)federal tax rates were essentially the same as they are now. The top five percent of taxpayers (those with an Adjusted Gross Income of $145,283 or more) paid 59.67 percent of all federal income taxes.
    In light of the progressive nature of federal income taxes (despite the Republicans best efforts to the contrary)isn’t it better to let taxpayers bear the brunt of the burden rather than shareholders in pension funds who need the money for retirement?
    Simplistic notions got us into this mess; simplistic solutions coming from well meaning people could easily make it worse.

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  27. WigWag says:

    John H using terms like “absolute and unrepentant scoundrels” doesn’t make you sound more convincing it just makes you sound silly.

    Reply

  28. JohnH says:

    The difference between you and me, Wigwag, is that you are willing to place your faith and trust in the Clintons, who have proven themselves to be absolute and unrepentant scoundrels–like the Bushes, Cheneys, McCains, and most of Congress.
    Personally, I prefer to support someone who is not a known scoundrel. Yes, Obama has a lot of support from the same offal that bought previous Presidents. But where is the proof that they own him?
    Maybe I’m clutching at straws–perhaps it’s ill conceived audacity of hope–but it’s better than supporting known scoundrels.

    Reply

  29. questions says:

    http://www.opensecrets.org/pres08/bundlers.php?id=N00009638
    “Even though these donors direct more money to the candidates than anyone else, disclosure can be spotty, with Obama and McCain posting bundlers by ranges, indicated in this chart with the “max” and “min” columns, and with the top ranges being simply “$500,000 or more.” Together, as of August 18, 534 elites have directed at least $75,750,000 to McCain, and 509 have gathered at least $63,300,000 for Obama.”
    Obama’s bundlers from Open Secrets– truly a thing to watch. McC is right up there…..

    Reply

  30. questions says:

    WigWag, the pasted WaPo piece below would seem to contradict the notion of Wall street bundlers, but I don’t know for sure. It does seem that these are individual decisions to donate, not $50,000 checks being handed over. If you find more info, I’d be interested. (The piece is from April 07)
    “Employees of Goldman, the world’s biggest securities firm by market value, donated $120,250 to Obama, who addressed Goldman’s annual partners’ meeting in Chicago last year, and $113,750 to Romney, the filings show. Clinton got $64,400 from the firm’s employees. Giuliani received $13,250.
    “These are private decisions by individuals at the firm to contribute, and it would be inappropriate for Goldman Sachs to comment on it,” said Peter Rose, a Goldman spokesman.
    http://www.washingtonpost.com/wp-dyn/content/article/2007/04/17/AR2007041701688.html
    ———————-
    Both, however, have been major beneficiaries of financial contributions from Wall Street, according to the Center for Responsive Politics. The nonpartisan watchdog group, which monitors campaign contributions to candidates for federal office, calculates that Obama has received nearly $10 million and McCain close to $7 million from employees of securities and investment firms. Obama raised $370,000 from Lehman Brothers earlier this year, and McCain got almost $300,000 from Merrill Lynch, according to the center’s data.
    http://www.dailysentinel.com/hp/content/shared/news/stories/2008/09/ELEX_WALLSTREET16_COX.html
    Again, nothing about bundlers, so I don’t really know.

    Reply

  31. pauline says:

    Bush’s Legacy Of Squandering Taxpayer Money
    Bush is demanding unprecedented control over billions of dollars — with no oversight. His history of mismanaging taxpayer dollars should make Americans skeptical of his buyout plan:
    IRAQ RECONSTRUCTION
    -$142 million wasted on reconstruction projects that were either terminated or canceled. [Special Inspector General for Iraq, 7/28/08]
    -“Significant” amount of U.S. funds for Iraq funneled to Sunni and Shiite militias. [GAO Comptroller, 3/11/08]
    -$180 million payed to construction company Bechtel for projects it never finished. [Federal audit, 7/25/07]
    -$5.1 billion in expenses for Iraq reconstruction charged without documentation. [Special Inspector General for Iraq Reconstruction report, 3/19/07]
    -$10 billion in spending on Iraq reconstruction was wasteful or poorly tracked. [GAO, 2/15/07]
    -Halliburton overcharged the government $100 million for one day’s work in 2004. [Project on Government Oversight, 10/8/04]
    KATRINA
    -Millions wasted on four no-bid contracts, including paying $20 million for an unusable camp for evacuees. [Homeland Security Department Inspector General, 9/10/08]
    -$2.4 billion in contracts doled out by FEMA that guaranteed profits for big companies. [Center for Public Integrity investigation, 6/25/07]
    -An estimated $2 billion in fraud and waste — nearly 11 percent of the $19 billion spent by FEMA on Hurricanes Katrina and Rita as of mid-June. [New York Times tally, 6/27/06]
    -“Widespread” waste and mismanagement on millions for Katrina recovery, including at least $3 million for 4,000 beds that were never used. [GAO, 3/16/06]
    DEFENSE CONTRACTS
    -A $50 million Air Force contract awarded to a company with close ties to senior Air Force officers, in a process “fraught with improper influence, irregular procedures, glaring conflicts of interest.” [Project on Government Oversight, 4/18/08]
    -$1.7 billion in excessive fees and waste paid by the Pentagon to the Interior Department to manage federal lands. [Defense Department and Interior Department Inspectors General audit, 12/25/06]
    -$1 trillion unaccounted for by the Pentagon, including 56 airplanes, 32 tanks, and 36 Javelin missile command launch-units. [GAO, 5/18/03]
    Given Bush’s history of gross fiscal mismanagement — including an unprecedented number of no-bid contracts and Bush’s resistance to closing fraud loopholes or increasing oversight of contracts — why should Americans trust another $700 billion to his care? Paul Krugman writes, “Let’s not be railroaded into accepting an enormously expensive plan that doesn’t seem to address the real problem.”
    see 9/21/08 —
    http://thinkprogress.org/

    Reply

  32. WigWag says:

    I do admit it, John H. Wall Street and the “knowledged classes” are the proud owners of the Democratic Party. They own it lock, stock and barrel. They owned the Party when Clinton was President and they own it now that Obama is running for President.
    By the way, here are some of the contributors to Senator Obama’s 2004 Senatorial Campaign:
    Eighth largest donor: Soros Fund Management
    Twelth largest donor: Goldman Sachs
    Thirteenth largest donor: Tejas Securities
    Fifteenth largest donor: Ariel Capital Managers
    Sixteenth largest donor: JP Morgan Chase
    Seventeenth largest donor: Skadden Arps
    Twentieth largest donor: Holland Capital Managers
    Wall Street and the financial industry seem to have a special affinity for Senator Obama (as they do for Sentor Clinton). By the way, I left out contribtions from several law firms who do securities work and have bankruptcy practices.
    My support for the Clintons in not unquestioning, John H. But they did many things that helped working people when the Big Dawg was President. In hind sight, Clinton did more for working people than any President since Roosevelt even when you take his mistakes into account.
    What has Obama done for anyone other than talk and call people names? But there you have me criticizing Obama again and I don’t want to do that. I want people to vote for him as the lesser of two evils.
    And one last thing, JohnH, you don’t know very much about the source of the issues facing Wall Street today if you think Gramm-Leach-Bliley caused the current mess. It’s actually the least important component of the mess we find ourselves in today.

    Reply

  33. JohnH says:

    Come on, Wigwag, admit it. The Clintons were totally IN BED with the finance industry. They needed Wall Street’s blessing for Hillary’s run, and they did whatever it took, even selling the country out. Your unquestioning support for them has made you totally blind to what they actually did.
    Sure, it’s easy to criticize Obama, but that doesn’t make the Clintons’ behavior right. And frankly it’s hypocritical to give the Clintons’ behavior a free pass while criticizing similar behavior by others.

    Reply

  34. WigWag says:

    Questions, these are presumably bundled donations. Senior executives of all of these companies are listed as major bundlers for Obama just like senior executives for several energy companies are major bundlers for McCain.
    By the way, McCain has plenty of Wall Street supporters as well. They include Steve Scwartzman and Pete Peterson of Blackstone.

    Reply

  35. questions says:

    WigWag,
    Quick question- is the donor list official corporate sponsors, or are the donors acting as individuals. When I donate, I list my employer, but my employer has NOTHING to do with my donations — no suggestions, no pressures, no nothing. I’m an independent agent when I hit “submit”.
    Now, if those donations are bundled and are thus official policy, I’d wonder more….

    Reply

  36. WigWag says:

    To John H:
    Yes John H, unlike the Clintons, Senator Obama is truly a man of the people.
    Obama Donors 2008 Presidential Run
    2nd largest donor: Goldman Sachs
    3rd largest donor: Citbank
    4th largest donor: JP Morgan Chase & Company
    5th largest donor: Morgan Stanley
    10thlargest donor: GE(which has a big finance arm)
    11th largest donor: UBS
    12th largest donor: Merrill Lynch
    13th largest donor: Lehman Brothers
    17th largest donor: American Bankers Association
    20th largest donor: Bank of America
    22nd largest donor: Credit Suise
    One other thing JohnH, AIG wasn’t regulated under
    Gramm-Leach-Bliley

    Reply

  37. JohnH says:

    Wigwag says, “Spitzer wanted this prominent Republican disgraced before he began his campaign for New York State Governor.”
    Is Spitzer’s behavior any worse than Bill Clinton’s signing of Gramm-Leach-Bliley, doing away with Depression era protections, to secure Wall Street’s blessing for Hillary’s campaign for New York State Senator? I think not.
    Yes, government was the enabler of the financial meltdown, brought to the American pulbic by Bill Clinton, Phil Gram, George Bush and the Best Congress Money Could Buy.

    Reply

  38. WigWag says:

    And one more thing, AIG is the perfect example of a company destroyed by the behavior of government. The CEO of AIG, Maurice Greenberg turned that company into one of the largest and most profitable insurance companies in the world. It was one of the most respected and influential American companies in the world. Had Greenberg been the CEO in 2008 none of this ever would have happened.
    In 2005, the now disgraced Eliot Spitzer forced Greenberg out as CEO over a trumped up scandal. How do we know it was a trumped up charge? Well, Mr. Greenberg was never indicted; he was never accused by the SEC of security violations and he was never charged with wrong doing by any of the state insurance regulators who regulated his insurance subsidiaries.
    Perhaps most telling is the fact that a successful shareholder derivitive suit over the supposed scandal was never brought against either Greenberg or AIG. Given the propensity of plaintiffs lawyers to sue, you can be sure that if there was even a whiff of scandal a successful suit would have been filed. None was.
    Spitzer replaced Greenberg with the inept Martin Sullivan who was later replaced by the equally inept Robert Willumstad. Willumstad to his credit announced today that he would forgo the $26 million in severence money that he is contractually entitled to. This is the first sign of honor from anyone involved with this mess to date.
    And who is running AIG now? Well the new CEO, Ed Liddy was forced out of Allstate a few years ago. He is on the Board of Directors of Goldman Sachs and a crony of Paulson’s (who was the CEO of Goldman Sachs before becoming Secretary of the Treasury). And just today, another crony of Pauslon’s, Suzanne Nora Johnson, a former Vice Chair of Goldman Sachs was added to the AIG Board.
    Why did Spitzer want Greenberg out in 2005? The answer couldn’t be clearer. Between 1998 and 2005 Hank Greenberg had donated almost $225,000 to political campaigns with most of it going to Republicans. Spitzer wanted this prominent Republican disgraced before he began his campaign for New York State Governor.
    So because of Spitzer’s political vendetta, one of the great geniuses of American business was forced out at AIG. It was only after Greenberg left that AIG started making dumb investments that lead to its near bankruptcy.
    So hear again, the failure of AIG was not the fault of misbehavior by shareholders. It was the result of misbehavior by government (in this case State government.)
    So why exactly does Mr. Vague think shareholders should be left holding the bag? By the way, amongst the largest holders of AIG were pension funds like the aforementioned CALPERS, that manage the retirement money of working people.
    Interpreting this financial meltdown as a failure of the private sector is wrong. It is a failure of government to appropriately regulate the private sector. Capitalists were motivated by the same thing that always motivates them; greed. Channeling that greed and preventing it from getting out of hand is governments job.
    The government failed. That’s one of the reasons that it has to pick up the pieces.

    Reply

  39. JohnH says:

    I guess Vague is hoping that “someone” will step in and rescue Visa when its mountain of consumer debts starts to come down in avalanches.
    Yes, “someone” needs to step in and resuce the finacial institutions. But that “someone” should not be another financial institution. It should be the government. Sweden provides a good model:
    http://www.ft.com/cms/s/0/40c4e278-8810-11dd-b114-0000779fd18c.html
    Paulson’s plan, having the government swap taxpayers’ cash for trash is a terrible model, which leaves the Wall Street gamblers free to binge another day.
    The very best way to avoid having bail-outs of companies too big to fail is to prevent companies from ever becoming too big to fail. Such thinking is anathema to the crony capitalists (AKA oligarchs and oligopolists) that rule the roost in today’s faux capitalist world. Breaking down concentrations of corporate power is essential both for democracy and for the future well being of the economy. A strong dose of real capitalism enforced by vigorous anti-trust regulation is what is really needed.

    Reply

  40. WigWag says:

    Mr. Vague is anxious for shareholders to bear the brunt of any losses caused by the current financial melt down, but he forgets that many of those shareholderes aren’t fat cats. Calpers (the California State Employee Pension System)has $240 billion under management (at least they did before stocks melted down). The New York State Pension Fund manages about $155 billion. What about all the other pension systems public and private. And what about all the working and middle class investors with IRAs and 401ks. Does Mr. Vague think the workers who have retirement funds tied up in these vehicles are villains who didn’t exercise proper oversight of the companies they owned shares in?
    And it is also important to remember that the government not the shareholders is responsible for many of the problems that we have today. Who instituted mark to market accounting rules for securities that are inherently difficult to value? Who allowed naked shortselling to continue unabated despite the fact that it was illegal? Who eliminated the uptick rule that would have at least slowed down the shorts? Who kept telling us that the country’s finances were essentially sound and who told us when home prices were sky rocketing that there was no bubble in housing?
    Who eliminated so many of the smart Roosevelt era financial regulations and replaced them with a free for all? It was government who did all of that at the behest of elites that control both the Democratic and Republican Party. It wasn’t small shareholders. All they were doing is going to work everyday in the hope that the money they put into their pension and retirement accounts would provide them a small nest egg when it came time to retire.
    Pretending shareholders are the villain is too simplistic. A plan that punishes shareholders punishes teachers, cops, firemen, clerks not just Wall Street Executives.

    Reply

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