rage against the street

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Mr. Monopoly and Scrooge McDuck perform here

party out of bounds

Who's to blame when parties really get out of hand?

Rep. John Boehner (R-OH)

Who's to blame when they get poorly planned?

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Fortunately, the grownups (i.e., the Senate) will vote first on the revised "Rescue" bill.

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Lyrics: B-52s "Party out of bounds"

scorecard

"After nearly eight years of voting in virtual lock step with President Bush on everything from tax cuts to torture, House Republicans decided on Monday to break ranks on the survival of the nation's financial system." New York Times, 9.29.08

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House Republicans have placed ideology and/or their self-interested hopes for re-election before the public good. One hopes an invisible hand materializes to turn these private vices into public virtues.

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Has there every been a lamer lame duck than G. W. Bush? Has a Speaker of the House ever been more inept than Nancy Pelosi? 

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Irony: Hank Paulson (former Sachs Goldman CEO) can't close the deal.

non!

133 House Republicans to George W. Bush: drop dead!

Wall Street to 133 House Republicans: -777.68

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Photo credit: Reuters/Liberation

toxic president

At a (new) defining moment of his presidency, George W. Bush finds the political capital of his office to be about as valuable as shares of Bear Stearns. Around November of 2001, his approval rating hovered near 90 percent. By tomorrow morning, with approval ratings in the low 30s, Bush will have made 3 separate speeches (actually one speech and two speechlettes) extolling the Paulson plan and exhorting support for it, and still can not rest assured that his financial bailout (now called a "rescue") of Wall Street, Main Street, and Global Capitalism, Inc. will be passed by recalcitrant members of his own political party. The original plan had all the hallmarks of Bush/Cheneyism and enough irritants to send House and Senate leaders of both parties into a collective rage. At last Thursday's photo-opportunity of blessed bipartisanship, the President had to endure the revolt of Republican Senator Richard Shelby and a shouting match between the presumed deal makers, all without the cover of shadow president Cheney. We are a long way from the "dead or alive" and "bring it on" bravado of the early days.

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There may be a larger lesson to learn from this: beware Republicans who run for office on a platform of running against government. They make abysmal governors once they attain office.

(lack of) money changes everything

"This sucker could go down," Bush is said to have told the group -- referring to the teetering US economy. (reports The Guardian)

Perhaps Bush should call for a "Coalition of the Giving" and collect funds from generous member nations like Poland or Georgia: "Hey, Saakashvili, can we renege on the 1 billion dollars Dick Cheney promised you?"  Or the USA could apply for a loan from the World Bank.

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In the meantime, House Republicans are reading von Mises and von Hayek while finance capitalism burns. Republican representative Mario Diaz-Balart (Fl.) lectured on Ortega y Gasset in the House friday morning. And Sarah Palin hasn't gotten back to Katie Couric yet.

political hysteria: McCain and the crisis

Deal or no deal? A lot is riding on this for McCain. House Republicans clearly don't want to sign off on the bail out. I assume the plan could pass despite House Republican opposition. But that would seem to doom McCain with important conservative constituents. If McCain can get the recalcitrant House Republicans to sign off (apparently a visit from Dick Cheney didn't move them at all and I doubt Bush's speech will persuade skeptics on the right), then he can take some credit, but only for reeling in the conservative rump. If he can't pull this off, the Republican party would be split (and not without good reasons) and Obama can point to the "ideology-driven partisanship" of House Republicans as another sign that "Washington is broken."

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McCain's suspension of his campaign and request to postpone the debate scheduled for Friday seems a little hysterical. He has successfully directed attention to himself and the punditocracy is slavishly fixated on his "decision." Will he? Won't he? The media is unable to recognize when it's being jerked around.  The short term strategic impact is that McCain has taken media attention away from Obama. The more general impression is that McCain's histrionics about the debate is another egocentric (generously termed "maverick") move on his part. Refusal to attend the debate would, however, be a disaster for McCain. It would leave a lasting image of the war hero hiding in his bunker, not leading but being led by the crisis. In other words, McCain First!

securitize this!

Remember the last "blank check" the Congress handed to President George W. Bush? I believe one Congressperson voted against this blank check and she was hounded on all sides. What did she know at the time that the other 534 members of Congress didn't?

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The main argument for "swift passage" of this $700 billion dollar blank check seems to be psychological: we need to restore "confidence" in the economic system for the confidence men and women who will then resume gambling.

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Americans have a predilection for seeking "something for nothing".+

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Wall Street opposes restrictions on executive compensation for financial operations which are selected for this bail out. Maybe a salary cap would be a more palatable option (it works for the NFL, NHL, and NBA).

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I've been taught to believe that market discipline should apply on both the bottom and top rungs of the economic ladder. If you fail, you fail: this is Social Darwinism 101. To reward failure is Un-American (aren't public school systems ending "social promotion"?). Suddenly unemployed finance bankers can apply for the public relief that's available through TANF as long as they participate in workfare (many streets in lower Manhattan need sweeping). The two year limit on this public relief is the stick that will incentivize them not to become dependent on welfare.

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Is it possible that a sleeper cell of irresponsible financiers actually posed a more significant threat to the American Way of Life than Saddam Hussein? How many Iraq wars could be fought (and won!) for $700 billion?

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+ Jackson Lears, Something for Nothing: Luck in America (NY: Penguin, 2004)

minima oeconomica

It was precious to see the former AIG CEO Hank Greenberg begging for money during his interview on MSNBC. He implored the Fed: "AIG is a national treasure." And it just so happens that most of his wealth is tied up in shares of AIG.

What was even more precious was learning that the Fed bought the sob story and floated a $85 billion loan to AIG.

I found myself agreeing with Republican Senator Richard Shelby (member of the Senate Banking Committee), who said "No entity is too big to fail."

The events of last week should make it difficult for Conservatives to bemoan "welfare dependency" without including "corporate welfare dependency."

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The "PC" term on Wall Street for this move by the Fed is "leveraged buyout." Government "bail out" is less PC. However, it could also be called "nationalization" (the term the British newspapers use). So the U. S. government has nationalized, Freddie, Fannie, and AIG.

Somewhere, Hugo Chavez must be smiling.

When Chavez or Evo Morales do it, it's nationalization. When Bush-Paulson-Bernanke do it, it's "stabilization."

I think this duck quacks.

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I don't know what to make of business leaders who plead for government help and yet resist government oversight. Should they be allowed to have their cake and eat it too?

The politics of blame has taken an interesting turn: now short sellers are the evildoers (not incompetent CEOs like Fuld of Lehman Brothers or Willumstad of AIG).

John McCain could send Governor Palin on a hunting expedition to kill bearish short sellers.

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It would be nice to have the billions dumped into Iraq back at this point.

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Since the Reagan era, "liberalism" has been a political schimpfwort and the Democratic party has been tainted by association with liberalism. However, if liberalism is associated with laissez-faire (economic liberalism), then the logic behind this association of liberalism and Democrats becomes more complicated: both Republicans and Democrats are economic liberals, with perhaps more rhetoric on that front from the Republicans. (In reality, laissez-faire is a myth, as the current nationalization of AIG indicates). One offshoot of economic liberalism can be termed "crony capitalism." A commentary by Tim Egan comparing Palin's governing style with the issue of golden parachutes for CEOs of failed corporations is enlightening. 

"People should stop picking on vice-presidential nominee Sarah Palin because she hired a high school classmate to oversee the state agricultural division, a woman who said she was qualified for the job because she liked cows when she was a kid. And they should lay off the governor for choosing another childhood friend to oversee a failing state-run dairy, allowing the Soviet-style business to ding taxpayers for $800,000 in additional losses.

What these critics don't understand is that crony capitalism is how things are done in Alaska. They reward failure in this Last Frontier state. In that sense, it's not unlike Wall Street's treatment of CEOs who run companies into the ground.

Look at Carly Fiorina, John McCain's top economic surrogate -- if you can find her this week, after the news and her narrative fused in a negative way. Dismissed as head of Hewlett-Packard after the company's stock plunged and nearly 20,000 workers were let go, she was rewarded with $44 million in compensation. Sweet!

Thank god McCain wants to appoint a commission to study the practice that enriched his chief economic adviser. On the campaign trail this week, McCain and Palin pledged to 'stop multimillion dollar payouts to CEOs' of failed companies. Good. Go talk to Fiorina at your next strategy meeting.

Palin is a cultural cousin to this kind of capitalism. The state may seem like a rugged arena for risky free-marketers. In truth, it's a strange mix of socialized projects and who-you-know hiring practices."

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I see no substantive distinction between American "liberals" and "conservatives" concerning the economy: both groups are pro-capitalist (the charge that liberals are 'socialists' is preposterous). Hence, we have different political parties that both operate on the assumptions of economic liberalism and have the goal of perpetuating the form of life that derives from economic liberalism. Anti-capitalist, populist rhetoric is a ruse employed by politicians of both parties to appear to be the friend of the "common man." No president of either party would risk enacting anti-capitalist policies for fear of an investment strike or capital flight (of course, capital flight -- outsourcing and relocation -- has already occurred under business-friendly policies).

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Both parties have put in place policies that have impacted the economy negatively. Everyone can point to a particular example. My example will be energy policy. To be sure, prior presidents have set this policy, but my immediate reference is Bush-Cheney. Today, it seems everyone is alarmed by America's "oil dependency" on foreign oil ("dependency" is a particularly stigmatized term: think "welfare dependency"; this is one step removed from "oil slavery"). After years of denying the existence climate change, now Conservatives are talking about "alternative fuels." However, one can ask who set the pro-oil dependency policies of the Bush-Cheney presidency? Was it not Cheney's still secret energy policy harem? Who can forget Bush's hand-holding diplomacy in Saudi Arabia? Is Cheney "liberal" or "conservative"? Will the U.S.'s energy policy cease to be premised on economic liberalism after the odious pair are gone?

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I expect free trade, small government, anti-tax Republicans to throw up a road block to the $700 billion dollar bail out of the unhappy few whose improvident behavior has backfired magnificently and will cost the many dearly. The Paulson plan seems to be a reversal of the principle of utility: the greatest happiness for the smallest number.