Obama White House Doesn’t Understand American Interest vs. Corporate Interest

-

citibank twn.jpgOne of the issues that has most irked me about the Obama administration’s approach to trying to move the economy forward is a fundamental misunderstanding about US national interests and how corporate behavior works.
Timothy Geithner, Lawrence Summers and the rest should know that the moment that US tax dollars pass the transom into the hands of corporate executives or even guarantee their financial decisions, those firms and their behavior must change from their normal operating habits to those which address the general needs of the American taxpayer.
But what we have seen is an Obama White House caught off guard by firms that took vast sums of American taxpayer dollars and paid them off many on their times with hefty bonuses. The most striking statistic is that financial firms that received bailout money have since last September’s crisis issued more than 5,000 people bonuses of a million dollars or more.
The White House and Congress have flailed around attacking automotive CEOs for not flying commercial and ordering their own private jets (which Congress is now doing itself) and have tried to wrestle, mostly unsuccessfully, with CEOs about their executive pay.
What is going on here? Who is in the driver’s seat?
Unfortunately, Timothy Geithner and Summers have continued the Hank Paulson strategy of begging banks and financial institutions to participate in the bailout programs that the government packaged together to recapitalize the American banking system. But the banks resisted, negotiated, and were able to get terms in the US-private sector relationship that undermined taxpayer interests while maximizing the firms’.

George Soros
wrote in the fall of 2008 and has repeated since frequently that bank and financial sector recapitalization should have been compulsory and across the board. Non-performing loans should have been recognized on the bank’s books and pushed to the side in an internal “old bank/new bank” structure that allowed to get the financial activities of the bank going again — while the government assured the “old bank” portfolios — and worked with the bank to steward those assets and guaranteed them until they could be brought back into the functioning bank.
Obama’s team failed to listen to Soros and many others who recommended this sort of approach.
These firms thus got the upper hand — and have been able to take US government taxpayer money to subsidize behaviors that are from a macro level quite disconcerting.
According to numerous sources I have spoken with and in some of the TARP oversight commentary, many of these financial firms are carrying a large load of non-performing loans financing commercial real estate. There is a “pretend and extend” game underway in which the bank/financial entity pretends that there has been little or no fall in the value of a major commercial real estate loan and extends the loan forward to keep the unrecognized losses off of its books. Regulators are involved in these institutions — and are complicit in this “pretend and extend” game.
Another bit of disturbing news is this tidbit from Naked Capitalism today in which many banks are turning up their noses at small business finance deals, in part subsidized by the Small Business Administration because the profits are too small.
Yves Smith writes:

The 1980s supermodel Linda Evangelista once said. “We don’t wake up for less than $10,000 a day.” That seems to be the motto of American bankers, (save Citigroup’s Andrew Hall, who needs 40 times that much per business day). Not only do they not care about things banks used to deem as important, like playing a role in their community, now they can’t even be bribed to go along with pretending that they care.
The latest object lesson is the complete lack of interest in banks in a new SBA lending program. The banks say the loans are too small and too much trouble to be worth the bother, even with a Federal subsidy. I gather it doesn’t occur to them if banks don’t lend to small businesses, which have been the only engine of job growth, we won’t have much improvement in unemployment, and if unemployment doesn’t fall, we won’t have a much in the way of recovery, and if we don’t have much of a recovery, they won’t have much of a business. The banks want to be a free riders on someone else doing whatever it takes to get the economy back in gear.

The government forfeited its leverage in the financial sector bailout early and should not have. No one wanted to say the word, “nationalization”.
And to escape the catcalls from those engaged in semantic warfares, we have pursued a bank/financial sector subsidization scheme that has rewarded the very people who got the US into this mess.
And if the shoe drops on the commercial real estate sector, which I and a lot of people smarter than me believe will happen — we may be back into the financial sector again, but then the terms will be even harder for the government because there is less uniformity of guilt and exposure in the next round.
Firms like Bank of America are doing a great deal to shore up reserves and to ride out a storm it sees coming. Banks like Citibank, partly because of the management of Bob Rubin and his like-minded allies, are chock-a-bloc with ongoing portfolio problems. Some banks are heavy with commercial real estate exposure and some have lightened their exposure significantly.
Next time, the government will be under great pressure to let these large institutions that it failed to properly and compulsorily recapitalize really fail — but wait (!) — those are the banks that the American taxpayers will pretty much own in full.
— Steve Clemons

Comments

41 comments on “Obama White House Doesn’t Understand American Interest vs. Corporate Interest

  1. Eric Garland says:

    Obama could not imagine trying to reinvent so many institutions at once, so he has labored tirelessly to keep them exactly the way they are. His only other option was to think differently, engage different executives in Washington who weren’t trapped by the 80s, 90s, and 2000s, rethink our problems from the ground up. You know- what he promised in the campaign. Instead we are protecting the old order at an extremely dear cost.
    Caution is often more costly than trying something new and creative, no matter what the outcome. The next wave of collapse will give us yet another opportunity to get this right, however painful.

    Reply

  2. Kathleen says:

    And then there’s this news of slumlords receiving stimulus money…
    http://www.propublica.org/ion/stimulus/item/stim-bucks-for-slumlords-817

    Reply

  3. TonyForesta says:

    The Commercial Real Estate tsunami is looming ominously on the horizon. All the false optimism leaping on notbadnews as goodnews, and the current uptick in the stock market is based on nothing but talk, and false accounting (killing the mark to market accounting rules which GAVE the big banks billions in paper imagined dollars), and 14 trillion dollars in government aid. The brilliant minds at Zero Hedge, Baseline Scenario, Calculated Risk, Naked Capitalism, and others including Soros are issuing alarms on these issues. The banks are insolvent. There will be no recovery until America’s poor and middleclass have real jobs, with real wages, and real benefits, and real bargaining power. Tragically none of these necessities are a reality, so what we are faced with is another Wall Street predatorclass bubble ready to burst. When the next bubble bursts, and it won’t be far off, September, October, sometimesoon, – there will be no more appetite for bailouts, and no more possibility for the Fed or Treasury to funnel even more trillons of taxpayers dollars into the offshore accounts of the fiends, swindlers, PONZI scheme operators, and criminals on Wall Street. The day of reckoning is coming. Obama squandered on his goodwill by bowing down to, protecting and appeasing the predatorclass snakes and shaitans in the finance oligarchs. Instead of correcting the bushgov failures and responsibility for bringing the entire world to the brink of financial collapse, Obama and his Goldman Sachs, Wall Street insider predatorclass economic team turned their backs and shat on the American people, and threw trillions of dollars at the FAILED management, and FAILED models of the FAILED finacial oligarchs who are singularly responsible for the greatest economic crisis since the depression. No one was responsible for anything. It’s business as usual and a rapid return to the halcyon days of mega bonus, and massive fictional profits based on PONZI schemes and the bruting and selling of irredeemable debt products.
    Obama betrayed the people who voted for him by siding with the oligarchs and the predatorclass in the finance sector, and currently in the healthcare, insurance, and pharmacuetical industrial complexes.
    Unfortunately, – the math is incontrivertable, and the socalled TBTF oligarchs have already indeed FAILED and are in FACT insolvent. The American taxpayer is burdened with imponderable debt, double digit unemployment, high double digit underemployment, no healthcare reform, a week and failing education system, collapsing infrastructure, and a government that is CAPTURED, owned and controlled by the predatorclass and predatorclass oligarchs.
    The next economic crisis (which is looming on the horizon) will end forever all the babble and chari vari of hope and change the Obama government bruted. America is fast going down the tubes, because our government no longers serves or protects, or advances the best interests of the people, – but is in fact owned, controlled, captured by, and peopled with the predatorclass swindlers, thieves, PONZI scheme architects, and criminals who have robbed and pillaged the wealth and resources of our once more perfect union for their singular obscene and wanton profit.
    Nothing has changed! We’re doomed!!!!

    Reply

  4. Rainymtn9@aol.com says:

    Don’t mean to rub salt in any corporate/public interest wounds but this article by Jim Hightower kind of Bozos Try to Kill Consumer Protection. http://jimhightower.com//node/6902

    Reply

  5. Kathleen says:

    OutragedAmerican…ballot aqccess is of course the key..it does exist…it was the original method…a slate of presidential electors, pledcged to an unaffiliated candidate,like Ralph Nader was, filed in each of the 50 states, with the mandated number of verified sigatures of voters in that state. The difficulty comes in the great disparity in the numbers of signatures by different states. The argument against a Federal number of signatures, and all having the same filing date is that the office of Presidential Elector is considered a State Office, not a Federal one. Makes it too easy in some states and almost impossible in others…the wide disparity in dates for filing make launching a nationwide campaing harder as well.
    The non-inquiring media is the real Pavlavian culprit in this syndrome…Carroll, I remember you did decide to write in Nader instead of not voting in protest. Someone up-thread said that old saying about trying the same thing and expecting a different outcome…I think we should compare resumes of accojmplishments for the general welfare, rather than voting by the R or the D. reflexively while kidding ourselves that a rapid rise to power is enough of a qualification to earn our vote. For example, former Senator Mike Gravel was responsible for publishing the Pentagon Papers and ending the draft. What has Obama done of equal significance for the general welfare of the country?

    Reply

  6. Outraged American says:

    Changing the two (ONE) party system is all about ballot access.
    That’s where it has to start if anyone truly wants to change the
    strangulation the one party system has on us.
    And the media, but again, after the Telecommunications Act of
    1996, there’s no hope for the mainstream media to actually inform
    the US populace. Not that they care, they are sheeple led to the
    slaughter.

    Reply

  7. Carroll says:

    Posted by Kathleen, Aug 15 2009, 5:49PM
    >>>>>>>>>>
    I broke my syndrome..I wrote in Ralph Nader for President in the ’08 election.
    When will other people wake up? Probably never.
    The majority of the public is evidently too stupid to realize they all have a common enemy, which is the corruption of both parties and our entire political system.
    I am not hopeful.

    Reply

  8. Kathleen says:

    Carroll…so when are voters going to catch on???Ever??? Until we break the voting D or R syndrome, nothing is going to change. I have not yet plumbed the depths of my disgust with Dems for their spineless jellyfish pandering to that shrivelling R minority…

    Reply

  9. Carroll says:

    Posted by Kathleen, Aug 14 2009, 6:43PM – Link
    “I don’t think the problem is that Obama, et al don’t understand the difference between corporate interests and public interests….the problem is that they understand that corporate interests and their own political interests are the same…””>>>>>>>
    Exactly…and how many times, for how long have we (most of us) said that.
    Name one thing, just one from a recent few decades selection… from the S&L meltdown of the 80’s, to the legistation for funny money accounting for the Enrons, to the Med D bill of Bush, to TARP, to the Cash for Clunkers of Obama that wasn’t in reality designed to be a gift to the corporates, the elite failures, opportunist and vultures waiting in the wings.
    There will be more of the same, we will keep commenting on the outrages.
    Burn Washington to the Ground and Start Over.
    Please.

    Reply

  10. wrensis says:

    You, as I have come to expect have managed to skirt political mine fields and speak the reality.
    Please continue your efforts and know they are greatly appreciated and enjoyed.

    Reply

  11. Kathleen says:

    Steve…I’m with you on getting back to the main topic…I don’t think the problem is that Obama, et al don’t understand the difference between corporate interests and public interests….the problem is that they understand that corporate interests and their own political interests are the same…
    Simon Johnson…C-SPAN http://baselinescenario.com/financial-crisis-for-beginners/

    Reply

  12. Steve Clemons says:

    Dan, Josh, Paul, and others — very interesting discussion. I admire
    and respect George Soros. Full Stop. I don’t have a problem with
    billionaires who feel committed to solving the world’s major
    problems. Much better than billionaires who do nothing at all — or
    make things work. Sheldon Andelson and Irving Moskowitz come
    to mind. Soros is a brilliant economic thinker who frequently
    outlines publicly his investment strategies – -and often as a global
    investor has told authorities what they need to do to protect
    themselves from those who would prey on their mistakes. I have
    no problem at this. But I find this debate about Soros and others
    distracting from my initial discussion about corporate vs. national
    interests. I think Soros provided invaluable and important counsel
    to the Obama White House – and feel that it should have been
    followed. I’m moving on to other topics now — best, steve
    clemons

    Reply

  13. Dan Kervick says:

    “I don’t fully understand your angle. This is the
    world we live in — certain injustices exist —
    I’m saying very powerful people taking action
    against those injustices is a good thing. What are
    you saying?”
    I’m saying that everyone else banding together to take action against the existence of very powerful people would be an even better thing.
    I don’t support communism or the elimination of private property. But I do support aggressively egalitarian policies and firm regulation of the market, including a 20 to 1 salary rule and more progressive tax policies that would redistribute wealth, raise the material and educational standards of living of the vast majority of Americans, make much more funding available for public investment and strategic economic planning, and prevent the kind of private accumulation of wealth that allows individuals to become as rich and powerful as George Soros.
    I also don’t trust George Soros because of his involvement in neo-Cold War activity, including the funding of color revolutions. Even if you think George Soros does mostly good, it is inherently dangerous for the kind of power he possesses as an individual to rest in any one man’s hands, to be disposed of as he pleases, outside the constraints of democratic control.

    Reply

  14. Kathleen says:

    For comic relief..here’s the latest on TARP Lobbying Rules, 10 months in the making, after the fact and reportedly in the final stages…http://thehill.com/business–lobby/tarp-lobbying-rules-just-now-in-final-stages-2009-08-06.html
    On the topic of Capitolism vs. Communism, I think oe taxpayer/voter/consumer, our former graduated income tax provided our country with a very effective middle way to stabilize our economy and lessen the extremes of wealth and poverty. The Gipper dismantled the graduated income tax, eliminated regulations that protected the taxpayer/voter/worker/consumer…and ushered in the “Me first” mentality that persists throughout our political/economic systems like an insatiable tapeworm.

    Reply

  15. Outraged American says:

    George Soros is Robin Hood, except he robbed from the poor to
    now feed the poor? So maybe he’s doing penance for past
    misdeeds? Except that I don’t think he’s Catholic.
    Do Jews do penance or is it all about Kol Nidre?
    Couldn’t resist that one…let the accusations fly!

    Reply

  16. Josh Meah says:

    Paul Norheim and Dan Kervick
    First, Paul Norheim.
    The rabble about George Soros here is just
    irrelevant. Critique however you want, I’m just
    re-highlighting that Steve’s post was about, in
    just minor parts, ideas attributed to Soros and
    not Soros himself. I felt like that was being lost
    in what was beginning to feel like a tirade of “I
    hate rich people.”
    I also question the notion that “bank robbery” is
    morally, legally, and socially unacceptable within
    our system. I think this post illustrates quite
    the opposite — taxpayers were robbed to fill CEO
    coffers without any kind of real ensurance that an
    investment on their return was on the way out.
    Yes, the implicit assumption here is that taxation
    is robbery — and in explicit response, taxing the
    public for the government’s or exclusively private
    interests is — yes — robbery. Taxation exists so
    the government can provide needed public services
    — PUBLIC — services. The gray area in this
    regard exists where the government provides for
    public interest through private interest. However,
    in this case, the public interest isn’t provided
    for — hence, robbery. And it’s accepted.
    Second, Dan Kervick.
    I don’t fully understand your angle. This is the
    world we live in — certain injustices exist —
    I’m saying very powerful people taking action
    against those injustices is a good thing. What are
    you saying?
    What is your alternative? And why am I viewed as
    exclusively supporting philanthropist
    billionaires? Just because I appreciate George
    Soros and Bill Gates doesn’t mean I disapprove of
    grassroots organizations that also motion against
    things unjust. The two can coincide.
    Your critique is with the system as a whole, that
    wealth and all of its manifestations embodies and
    symbolizes a system of human exploitation. There
    are a few problems with this to the effect that
    such a critique should be impactful: 1) we need an
    alternative and a method for getting there from
    where we are; 2) there should be at least
    theoretical evidence that such a society is more
    desirable than this one; I feel as if you are
    alluding to a Communist society, and EVEN IF you
    argue that Communism is preferable to Capitalism,
    you’d still need to make clear it’s cultural
    appropriateness to this society. Love for Cuba and
    Venezuela might be adequate for Cubans and
    Venezuelans, but there is an actual American
    culture that — I believe — would greatly contest
    such an overwhelming movement toward equality at
    the expense of individuality and justice.
    And lastly, an implicit premise of your argument
    is that an ultimate human peace, without any kinds
    of problems, is most desirable. To that — check
    out the final essay in the book The Coming Anarchy
    by Robert Kaplan. Peace does not guarantee peace.

    Reply

  17. readerOfTeaLeaves says:

    I’ve read this blog frequently for several years now, and IMHO
    this may be the finest, most fundamentally important post that
    I’ve read here.
    The conflation of “US interests” with corporations has led to
    sloppy thinking, dreadful policies, and — most critically in my
    view — the obsequious pandering of the electeds toward
    corporate managerial interests. And as Cato points out, for
    some in key decision-making positions within government, the
    conflating private-public into a single fuzzy concept:
    “corporament”, or “goveration”, has led to the creation of huge
    subsidies from the public trough. Those subsidies are, as you
    point out, a form of concentrated wealth handed from the many
    to the few.
    It’s hard to see how this can be politically or economically
    sustainable over the next ten years; in that respect, it’s
    astoundingly dumb.
    But in an era when Wal-Mart employs more people than most
    US states employ, and when Wal-Mart’s revenues are larger
    than most US state budgets, it’s clear that the original
    dependence of corporations upon government has been turned
    inside out.
    Corporations in a globalized economy have different demands
    on government than their predecessors, but the most egregious
    offenders are the chemical polluters and the financiers. At this
    point, the ‘finance’ corporations appear to have become
    economic parasites quite capable of eating their host
    governments; the failure of electeds to recognize this simple
    dynamic is irresponsible.
    It makes about as much sense as allowing your children to eat
    you alive; it may happen in the world of slime molds and
    viruses, but in a global economy it’s setting up the conditions of
    your own economic and political self-destruction. It’s the
    abdication of political leadership to the whims and demands of
    economic elites: stupid beyond belief.
    A running theme throughout the economic disasters we’ve
    witnessed the past 20 years: secrecy, misinformation,
    suspicious accounting methods, and other forms of delusion
    and mistrust. Those should have tipped off even the dimmest
    politicos (and yes, “Inhofe” comes to mind) that maybe this
    system wasn’t designed to ‘create the greatest good for the
    greatest number’. But like goldfish swimming in a toilet bowl, it
    appears that electeds viewed this all as ‘normal’.
    For those trashing Soros, I’d point out that his two most recent
    books are fine analyses of the problems and errors in the
    current global finance system. His ability to describe the
    dynamics at work, and the problems they create, is impressive.
    His recommendations for solutions to current problems are
    elegantly simple.

    Reply

  18. ... says:

    i happen to agree with josh meah, but i guess you all already knew that.. dan kervick i don’t think josh said he admires a system of billionaire philanthropists as “”the only”” change agents.. but why negate someone like soros who is capable of doing something positive here? btw there are very few things i tend to disagree with you on..
    paul norheim what is the other option at this point when it comes to changing a corrupt financial system? who is going to be responsible for changing it? if we don’t have individuals like soros or buffett coming out and opening acknowledging the huge flaws and disparities in this system, who is going to step forward to challenge its basis? i think soros is on the right path and can’t really understand why some want to take him down a few pegs as well… i don’t really care who it is who gets around to making changes to the present system and it can just as likely be someone like soros with more familiarity with it then not…

    Reply

  19. Dan Kervick says:

    Josh Meah,
    Soros’s beat is global civil liberties and human rights, and I do support some of the activities his foundation pursues.
    But I don’t share your apparent admiration for the system of billionaire philanthropists as change agents. We don’t have to have a world in which change is driven only titanic individuals. And because we have a system that allows some individuals to amass government-sized fortunes, then for every George Soros we have ten other captains of finance and commerce who use their burgeoning wealth-power to enslave and exploit humanity further. Let’s hear more from Soros about deep structural changes to the kind of economic system that allows some people to become George Soros while others languish in menial ignorance, and that permits vast discrepancies in individual social power, which leaves us dependent on the vicissitudes of fortune as to whether that power is then used for good of ill.
    The CEO Tarp bonus issue is small potatoes. It’s an epiphenomenon of the problem, not the problem itself.

    Reply

  20. Philippe says:

    Beside the moral hazard of letting the bank off so lightly.
    I worry about the Argentina syndrome, if we soon have to face another collapse. This time the western nation debt ratios will be at korean level. And who would bail out the governements ?

    Reply

  21. Paul Norheim says:

    Josh,
    if you regard WigWag`s and Dan Kervick`s criticism of Soros` financial maneuvering as garbage, trash and cheap ad hominem attacks, could you provide the commenters at TWN with some guidelines of how to criticize a public figure without being ad hominem?
    Or are you perhaps suggesting that if my ideas are nice, nobody has the right to criticize me for robbing a bank last week?
    Or perhaps my bank robbery only deserves criticism if my neocon think tank is financed with money from the robbery?
    Of course, bank robbery is an inappropriate analogy here, both since Soros operated on a much bigger scale, and since bank robbery is morally, legally and socially unacceptable within our system. I admit that both Soros and Gates are paradoxical and intriguing figures within the capitalistic system. But I fail to see how that automatically makes them immune from criticism.
    I`m sure both WigWag and Dan are able to grasp Steve`s point (national interest versus corporate behavior) and your point (Georges Soros = big scale version of Robin Hood). They just disagree with the premises. That`s not the same as being ad hominem.

    Reply

  22. Steve Clemons says:

    Josh — many thanks. best from Australia,
    steve

    Reply

  23. Josh Meah says:

    To the above comments: What is all of this garbage
    about trashing George Soros?
    If his Quantum Fund kicks ass and makes a ton of
    money and Soros then uses that money for causes
    that one agrees with then what’s the big deal? The
    system preexisted Soros, and Soros made a bundle
    working within the system that pretty much
    everyone here commenting finds unjust.
    After acquiring the requisite finances, Soros
    becomes a change-agent to work against an unjust
    system.
    So, instead of being a penniless revolutionary,
    Soros works from inside the system to change
    things. Must all true “leftists” or whatever be
    under-resourced? Once more, Soros understands what
    “unjust” means, practically speaking, because he’s
    lived on the inside.
    Be practical people, please.
    It’s akin to trashing Bill Gates, because of
    Microsoft’s virtual monopoly on operating systems.
    Yes, fine, pick on his practices. But observe his
    critiques of the world for what they are — Gates
    also represents the Gates Foundation, a literal
    lifeline for millions.
    Soros is a major funder of a lot of organizations
    you all endorse. So cut the crap. Soros makes a
    good point — analyze the ideas for what they are
    and leave the ad hominems out — at the very
    least, they fit a different discussion.
    Anyway, nice post.

    Reply

  24. Clint says:

    It’s not that Obama/Geithner/Crew don’t understand the contradiction between the corporate interest and the American people’s interest.
    This administration is firmly under the control of those corporate interests. They financed the campaign, and since Jan. 20 they’ve been collecting returns on their investment.
    Where’s the change from this supposedly radical liberal?

    Reply

  25. Dan Kervick says:

    Steve,
    For any of us who have even one last itsy, bitsy quasi-Marxist metatarsel remaining in our bodies – that is for anyone who is still anywhere near the genuine “left” and who hasn’t gone whole-hog, DLC and DC neoliberal – it is clear that people like George Soros and his ilk thrive by by sucking massive amounts of unmerited wealth out of our economic system, most of which wealth is attributable to the sweat of other people’s brows, and is garnished out of all proportion to the capital owner’s own modest contribution to the productive enterprise. We have permitted a system that allows people to horde massive amounts of exploitative wealth in the form of private property, and in compensation for their modest skills in steering that wealth around the capital markets, they are permitted to suck up even vaster fortunes while their employees and pigeons live on Whoppers, beer and lottery tickets. Its’ sick and crazy. Spare me the wisdom of George Soros.
    Worrying about the special case of the use of tax revenues just seems like fussing over one unsightedly mole on the ankle of a leperous bawd, with comical concern for the sake of “appearances”, and is window dressing for an unwillingness to do anything serious about our perverse system.

    Reply

  26. Outraged American says:

    What we’ve seen is Rahm Emanuel paying off his friends.

    Reply

  27. questions says:

    I think the fundamental problem is that the oligarchs are just hard to beat, and in fact, if they lose, the small-d democrats lose as well. We’re utterly out of balance between these basic factions and the correction process is horrific.
    Hell hath no fury like an oligarch scorned.
    I would hazard a guess that Obama might prefer a very different balance but that he realizes the intensity of the pain if we go through a sudden shift in power.
    Further, so many small-d democrats (the poor) identify with the oligarchs that it’s even harder than it should be to press a reset button.

    Reply

  28. Spunkmeyer says:

    Three words: bipartisan ownership class. Corporations will
    continue to manufacture controversies for media outlets to
    broadcast and supposedly debate ad infinitum to keep citizens at
    each others throats while they continue to go to the bank.

    Reply

  29. ... says:

    i agree with dons view on this and to a lesser extent vontrapp who states the financial industry is a blind spot for obama… i think obama might be well aware of how wrapped around its finger the financial industry has politicians and the political system..this makes it hard to impossible for politicians to make much if any change to the status quo…
    as for george soros, i agree with what steve articulated in response to wigwag which i thought was fairly obvious, but glad steve responded instead of me… soros might be a part of the financial system in so far as he sees how it works and knows how to “””””””””capitalize”””””””” on it, but he is not so foolish as to not see it for what it is…. as warren buffett so aptly said in describing the derivative markets- weapons of mass destruction is indeed what these derivatives are, but neither of these individuals is in a position to turn back the hands of time of a system that is in critical need of restraint and guidelines… of course the gov’t under guidance for the fox gaurding the hen house- federal reserve – has seen to it to not change anything when it comes to controlling the use and abuse of these same derivatives… this is gave aig the green light to come close to blowing up the whole system…. only a matter of time before another aig fiasco happens… meanwhile the gov’t goes into debt letting these scoundrels off the hook… that is what capitalism has come down to circa 2009….

    Reply

  30. Liz says:

    President Obama seemed to believe it was better to have ’em with him than against him, hence the Geithner/Summers choices. He either underestimated the downside of letting the foxes into the hen house, or he believed that it was worth the cost paid by the taxpayer in exchange for what ?
    This is what troubles me. What devilish bargain did he strike and with whom ? I would guess that keeping the banks off his back during his first term and placating American international creditors played a role somewhere. The reasons behind pro-bank (read Goldman Sachs) appointees certainly can not be because President Obama is stupid or naive. That would not jive with what we know about President “long-view” Obama.

    Reply

  31. Kathleen says:

    DonS,,,if the next finacial shoe drops, will it be another Gucci? It seeems TARP was a golden goose poised to lay a few more golde eggs. Here’s a NYT Editorial on the gift that keeps on giving, so to speak… http://www.nytimes.com/2009/08/12/opinion/12wed1.html?_r=1&th&emc=th

    Reply

  32. DonS says:

    As I recall, a big part of the insufficient response of the Federal govt to the financial crisis was it’s unwillingness to understand that worthless assets = worthless assets, i.e., that financial institutions in essences were in failure mode. No, it seemed more important to wink and look the other way, as if simply saying the American financial institutions were ‘fundamentally sound’ — taking their aggregate picture — the toxic nature of much of their holdings could be rendered in fact sound, at least ‘in time’.
    In the real world that doesn’t happen, that is, in the world that you and I inhabit, we need to be able to back up our mouths with some money, even if it’s only on the margin, so to speak.
    But the perhaps larger problem , as I see it, and what Steve alludes to in citing fear of “nationalization”, is the failure to find political will to pull the curtain back on the massive ponzi scheme that is the high rolling financial system. Under this ruse the biggest players insulate themselves from real world consequences by creating layers between their monetary take and any real financial responsibility for making a paycheck, so to speak. To do so would be to admit that “high finance” has as much or as little credibility as a fiat currency, which we all know is based mostly on faith.
    Well, we are all paying dearly for saving the high rollers the embarrassment of noting that they are nothing but well compensated thieves in Gucci shoes. And, it seems prudent to wonder, if that particular house of cards tumbled, as it well deserves to, how many related figments of the American dream would crumble in the wake. It is in this respect that it would truly take a courageous political figure to set a different course. Bush/Paulson started the ball rolling in the direction that would help their friends. Obama has essentially not changed course much and there is little indication that he has it in him — even if he had the insight — to make waves that big — which, given the bully pulpit, and the short term cowardice of Congress to respond to real hints of change, might have been possible. So if the next financial shoe drops, will Obama be up to it?

    Reply

  33. Kathleen says:

    Precisely again!!!All the more reason for taxpayers to support “Cramdown” legislation. See
    http://www.propublica.org/ion/bailout/item/bankruptcy-judges-justice-dept.-rip-mortgage-companies-811
    If you really want to get to the core of the problem, go to http://www.betterworldcampaign.org/
    and vote in their poll on what to tell Obama to say to the UN on September 23, 2009…their first choice of topics is for the USA to pay its dues and support UN Peacekeepers….that would go a long way to cure what ails us all….Peacekeeprs, not Warmakers…

    Reply

  34. Steve Clemons says:

    WigWag — thanks for your note, but I think you misunderstand
    my point. I am not asking for corporations to behave any
    differently than they currently do. Financiers, investors,
    manufacturers have an array of opportunities and constraints
    and should compete to achieve sustainable profits. But when
    the line is crossed regarding taxpayer money, those behaviors
    should change. George Soros has not taken government money.
    More often than not, he has lent other governments money and
    bridge loans to keep them solvent during crises — as he once
    did with Russia. But my point is that corporations and the public
    interest run on different tracks — and once the financial sector
    took from the public trust, the government should have been
    redirecting the firms and their behavior more than has
    happened. We are currently in a track where firms are being
    rewarded for bad behavior and in which both the recapitalization
    scheme hatched by Geithner and Summers and the direction of
    the backloaded stimulus are likely to be insufficient for the
    country, which got very bad terms for these investments that
    they have made — all while too many on Wall Street are
    pocketing publicly subsidized seven figure bonus checks.
    All best, steve

    Reply

  35. vontrapp says:

    President’s biggest blindspot, is the financial industry. He simply doesn’t understand the immorality of the financial industry. He simply doesn’t appreciate how badly the financial industry behaves.
    He has taken on the bake-centric economic views of Summers/Ge­ithner/Rub­in. And those views quite simply, are perversions of the reasons banks are supposed to exist in the first place.
    Finance is supposed to provide a service. Capital for real industries, that produce tangible goods and services. Under the philosophy of Summers/Ge­ithner/Rub­in, the economy exists to support the banks. That finance profiteering is the ultimate goal of an economy. And all actions taken should buttress and protect financial profiteering.
    This is Obama’s biggest blindspot. And it’s a tragic one for the American taxpayer. He promised us change we could believe in. And in perhaps the most important area, the economy, he has produced nothing but More Of The Same.
    It’s sad, because I believed in him. But he has placed himself squarely on the side of the financiers and corporatists that use Wall Street as the worlds greatest casino. A casino with a taxpayer-financed insurance option. Wall Street profits, they keep it. Wall Street loses, we pay for it. And get nothing in return for our money.

    Reply

  36. WigWag says:

    George Soros wrote in the fall of 2008 and has repeated since frequently that bank and financial sector recapitalization should have been compulsory and across the board. Non-performing loans should have been recognized on the bank’s books and pushed to the side in an internal “old bank/new bank” structure that allowed to get the financial activities of the bank going again — while the government assured the “old bank” portfolios — and worked with the bank to steward those assets and guaranteed them until they could be brought back into the functioning bank.”
    Steve might want to be a little more circumspect before he cites George Soros in the same post where he complains about absurd bonus payments and financial firms taking unwise speculative risks.
    I wonder how much bonus money Soros Fund Management and the Quantum Fund have paid out over the years. Steve’s mentions with disapproval, bonus payments in excess of $1 million. How many Soros employees have been paid bonuses of $1 million or more over the years? Count on the fact that it’s quite a few. How much of the income that Soros derives from his hedge fund affiliations is taxed at preferential rates far below what he would pay if they were taxed as ordinary income. To his credit, Soros has criticized the preferential treatment but has he volunteered to give the money back?
    And Soros made the bulk of his money speculating in currencies; exactly the type of behavior that Steve has mentioned in several recent posts as unproductive and not related to the real economy.
    His biggest score was shorting the British pound in 1992. Soros made a billion but thousands if not tens of thousands of British workers lost their jobs as a result.
    Fundamentally Steve’s post is exactly right. But despite his philanthropy, his support of progressive politicians and his interest in foreign affairs, George Soros is not one of the good guys.
    Soros makes his money profiting on all of the things Steve bemoans.

    Reply

  37. ... says:

    thanks for the good article steve…the way i see it is the american public have been brainwashed into thinking its form of capitalism is the only valid system to adopt.. however corporations, specifically the banking system are interested in something very different something for the american taxpayer as you say or what i refer to as socialism…. good luck undoing generations of brainwashing on this issue… it has been particularly hardcore in the usa and we here in canada get a birds eye view on it, as we have to deal with it encroaching on our institutions and way of doing things here which is for lack of a better word – more socialistic… lame ass harper is trying hard as head bootlicker to adopt usa ideology, just when usa ideology is in the gutter with no sign of it getting out of the gutter…

    Reply

  38. Cato the Censor says:

    The reason why the Obama administration cannot distinguish corporate interests from the national interest is because to Obama and his staff, they are one and the same thing, not separate categories. To Geithner and Summer’s thinking, if the wretched oligarchic caste that they belong to prospers, then the nation must be prospering. This sort of epic short-sightedness is common to all great powers in their hubris from Rome to the present day. Realizing that the United States has degenerated from a constitutional democracy into a dysfunctional, second-rate oligarchy and that the nation’s oligarchs are incapable of addressing the problems that they in large part caused is an essential, threshold step in dealing with this and other grave problems. Good work on calling it straight on Geither, Summers, Paulson, et al.

    Reply

  39. Kathleen says:

    Precisely!!!!…Obama was not in office when the first TARP bill was passed, but he was in office when the restriction on CEO bonuses was stripped from the bill while in conference…stripped by Senator Dodd at the request of Geitner…the first bill was tantamount to piracy by the banks…no questions asked, no oversight…what the hell were they thinking?
    Taxpayers/voters who resent banks taking money for “toxic assets” and then not losening credit to stem the tide of foreclosures, but rather parking the money with the Fed instead, should pressure Congress to pass the pending “cramdown” legislation which would give Bankruptcy Judges the authority to force banks to re-finance mortages at cramdown rates. This legislation died for a while but is enjoying a reseugence…I’m sorry I don’t know the number of the bill, but it sure sounds sensible to me. Since it’s too damned late to recover the TARP money, I at least want it to be used for more than bonuses.
    If you want to follow the nitty-gritty details on the TARP/Economy thingee go to ProPublica…it’s a treasure trove of details.
    Meanwhile, back at the till, I wonder what former NYSE Chairman Richard Grasso thinks of the current economy and TARP??

    Reply

Add your comment

Your email address will not be published. Required fields are marked *