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Economy

Bush On TARP: ‘Why Did I Sign On To This Proposal If I Don’t Understand What It Does?’

By Pat Garofalo on Sep 15, 2009 at 8:00 pm

AP060710012943On September 24, 2008, former President George Bush addressed the nation to explain the $700 billion Troubled Asset Relief Program (TARP) that was being crafted by the administration, the Treasury Department, and Congress. “Under our proposal,” Bush explained, “the federal government would put up to $700 billion taxpayer dollars on the line to purchase troubled assets that are clogging the financial system.”

But former Bush speechwriter Matt Latimer wrote in an upcoming book (excerpted by GQ) that, even hours before he gave an address promoting the TARP, Bush fundamentally misunderstood what the program was all about:

Under his proposal, he said, the federal government would buy troubled mortgages on the cheap and then resell them at a higher price when the market for them stabilized. “We’re buying low and selling high,” he kept saying. The problem was that his proposal didn’t work like that…As it turned out, the plan wasn’t to buy low and sell high. In some cases, in fact, Secretary Paulson wanted to pay more than the securities were likely worth in order to put more money into the markets as soon as possible. [...]

In the theater, the president was clearly confused about how the government would buy these securities. He repeated his belief that the government was going to “buy low and sell high,” and he still didn’t understand why we hadn’t put that into the speech like he’d asked us to. When it was explained to him that his concept of the bailout proposal wasn’t correct, the president was momentarily speechless. He threw up his hands in frustration. “Why did I sign on to this proposal if I don’t understand what it does?” he asked.

The proposal that Bush offered that night would ultimately be rejected by the House of Representatives, with a slightly modified bill passing one week later. And it should come as no surprise that Treasury Secretary Hank Paulson ultimately abandoned the idea to buy toxic assets entirely, instead opting for bank recapitalization, devoid of meaningful strings for the banks. As Latimer reported it, “the treasury secretary didn’t seem to know [which course of action he favored], changed his mind, had misled the president, or some combination of the three.”

Meanwhile, the toxic assets, which warranted such attention at the time, have not gone away. As the Congressional Oversight Panel for the TARP wrote last month, the financial system remains vulnerable “to the crisis conditions that TARP was meant to fix.”

In the book, Latimer also reported that Bush joked about Hillary Clinton’s “fat keister,” called Gov. Sarah Palin (R-AK) the “governor of Guam,” and said that he himself had “redefined the conservative movement.”

Politics

Real-life ‘Norma Rae’ dies of cancer after her health insurance refused to cover her medications.

By Amanda Terkel on Sep 15, 2009 at 8:00 pm

crystallee Crystal Lee Sutton, whose courageous efforts organizing Southern textile mills inspired the award-winning 1979 film “Norma Rae,” passed away on Friday after a long battle with brain cancer. Sutton’s story is particularly tragic because after fighting her whole life for rights of working Americans, her health insurance wouldn’t cover the medications she needed:

She went two months without possible life-saving medications because her insurance wouldn’t cover it, another example of abusing the working poor, she said.

“How in the world can it take so long to find out (whether they would cover the medicine or not) when it could be a matter of life or death,” she said. “It is almost like, in a way, committing murder.”

Although Sutton eventually received the medication, the cancer had already taken a toll on her.

Politics

Santorum Ties Himself Into Knots Justifying Congress’ Use Of Reconciliation During The Bush Years

By Amanda Terkel on Sep 15, 2009 at 7:00 pm

AP061102013887444 On an RNC conference call today, Politico’s Ben Smith asked former Pennsylvania Republican Sen. Rick Santorum why he believes it would be an “abomination” for Congress to use the budget reconciliation process — which requires 51 instead of 60 votes — to pass health care reform, considering that the Republican Congress also used it to pass bills, such as President Bush’s tax cuts.

Santorum tried to name every way he could think of that might justify his position, including: 1) unlike health care, a tax bill is a “revenue bill” and “affects the budget,” 2) health care is “major policy initiative,” and 3) the reconciliation process will make a “huge and complex” bill even “more complex.”

When Smith pointed out that Republicans used the reconciliation process to push through drilling in the Arctic National Wildlife Refuge — which is also arguably a major policy initiative that isn’t just a revenue bill — Santorum tried to argue that it wasn’t AS major, so it was acceptable:

SANTORUM: Well, again, you’re talking about a situation where, again, the biggest thing about drilling is certainly it has an impact on a small chunk of land in northern Alaska, and it has an impact on the federal revenue, but it’s not a particularly complex thing. You’re talking about drilling holes, as opposed to rejiggering and rewriting and reconstructing the entire health care system of this country. And the impact on the 350 million Americans for drilling a few holes in Alaska is fairly minor, as far as how it affects their daily lives. As opposed to — and by the way, it’s fairly minor on the economy, certainly in the short term, a little more in the long term. But again, nothing compared to what we’re talking about here with health care.

Listen here:

That’s not what Santorum argued at the time. In 2006, he wrote that Arctic drilling “has the potential to play a significant role in reducing our dependence on foreign oil.” Cantor also admitted that tax cuts would have more than a “minor” effect on the economy, saying in 2001, “There is nothing better that we can do for long term growth of our economy to lower these oppressive tax rates we have in place right now.” Basically, reconciliation is okay for any bill EXCEPT for Obama’s health care legislation — which is both too big and too small.

Congress has used reconciliation nearly 20 times since 1980 for everything from the State Children’s Health Insurance Program to student aid efforts, to expanding Medicaid eligibility. In 1995, Santorum was the GOP’s point person to push welfare reform through the budget reconciliation process. “This is a bill the president has absolutely no reason not to sign,” argued Santorum. He is also in no place to be lecturing Democrats on the proper use of reconciliation, considering that under Bush, Republicans fired two successive Senate parliamentarians who disagreed with what they were doing.

Transcript: Read more

Related Posts

Climate Progress

E&E: Reid says cap-and-trade bill MAY wait till 2010

By Joe Romm on Sep 15, 2009 at 6:29 pm

http://2.bp.blogspot.com/_rqH4fUbko2U/RzmvDHvihoI/AAAAAAAAE_g/dpeOPMMhito/s320/DogBitesMan.jpgSenate Majority Leader Harry Reid (D-Nev.) today said the Senate may not act on comprehensive energy and climate change legislation until next year, given the chamber’s busy fall schedule.

This E&E News PM (subs. req’d) piece is mostly a “Dog Bites Man” story — especially with the key qualifier “may” — isn’t really news to anybody who’s been paying attention or reading this blog:

I’d say right now it’s about 50-50 we get a vote this year,  and as readers know, I don’t think it matters terribly much.  There’s gonna be a Senate vote on a climate bill — that is clear from Obama’s decision to speak at U.N. special session on global warming (and Todd Stern’s testimony). Even Inhofe knows that.  We get one bit at this man apple, so the key is to work hard and pick the best time to pass the damn thing.

That said, I’d say the ideal time for a vote might be the first week in December, right before the international conference at Copenhagen.  That’s when maximum attention and pressure can be brought to bear on this historical vote.  But I do expect Copenhagen to 1) not have a final deal but 2) to move the negotiations forward, so  having the debate and vote in January can also work.

I do think this vindicates my original recommendation back in January that “Obama needs to pass in 2009 the mother of all energy bills” and then pass a climate bill in early 2010.  But now I think it is much too late to split the bills, as much as some members might like that.  Nor does it appear that is Reid’s preference:

Read more

Yglesias

Endgame

By Matthew Yglesias on Sep 15, 2009 at 6:14 pm

— Is Google FastFlip a step backwards.

— It seems to me that sports events and concert venues could use more dynamic pricing.

— Women lawmakers outperform men which is exactly what you would expect in a discriminatory situation.

— I think Nate’s grandfather being for DOMA repeal is reasonably realistic; the Archibalds would have to be New York RINOs in the Javits/Rockefeller/Lindsay/Bloomberg tradition.

— A strategy to exit Afghanistan.

— The “I’mma let you finish” Tumblr.

Climate Progress

Dorgan Supports Climate Legislation So Long As It Doesn’t Address Climate Change

By Brad Johnson on Sep 15, 2009 at 5:44 pm

Speaking on the Senate floor this morning, Sen. Byron Dorgan (D-ND) responded to criticism that he does not support climate change legislation. Dorgan reiterated his opposition to the creation of a carbon market with a cap-and-trade system to limit global warming pollution. He aggressively dismissed the Waxman-Markey American Clean Energy and Security Act (ACES), the clean energy and climate legislation supported by President Obama and passed by the House in June. Arguing that the energy legislation crafted by the Senate Energy Committee “takes significant steps towards addressing climate,” Dorgan calls for its passage “and then at some point later bringing a climate change bill to the floor”:

I hope very much when people think about energy and climate change, that a consideration will exist of bringing a good energy bill to the floor that is a significant step in the right direction for climate change. And then at some point later bringing a climate change bill to the floor, because I think they are related but separate. And I think it would be much smarter to get the value and the success of an energy bill that’s now out of the committee and ready to be dealt with by the Senate at some point very soon.

Watch it:

Dorgan’s belief that energy and climate policy are “separate” mirrors the argument made by House Agriculture chair Collin Peterson (D-MN) that “mixing climate change together with energy independence” isn’t smart. In fact, reforming our broken energy policy requires recognition that the entire lifecycle of energy use matters.

Worse, however, is Dorgan’s claim that the legislation the Senate energy committee approved — the American Clean Energy Leadership Act (ACELA) — is a “giant way towards addressing climate change.” This is simply untrue. As Center for American Progress Action Fund John Podesta has described, the Senate bill is “weak, toothless, and unacceptable.”

The Senate bill has a ineffectual renewable electricity standard — which Dorgan seemed to recognize when he said it should be raised to match the level in ACES — in addition to expanded subsidies for nuclear, coal, and the oil and gas industries. In no way would its passage begin to reduce the global warming pollution of the United States, the essence of a “climate bill.”

Dorgan also pledged his allegiance to coal, which he calls “our most abundant resource,” despite it being — unlike the wind, sun, and tides — a finite fossil fuel. This year alone, Dorgan has received $225,910 from coal-powered electric utilities and is the number two recipient of coal mining cash in the Senate.

Transcript: Read more

Yglesias

Financial Mutually Assured Destruction

By Matthew Yglesias on Sep 15, 2009 at 5:27 pm

Money

Noam Scheiber has a fascinating article on Chinese worries about the U.S. budget deficit and American policymakers’ efforts to calm those fears. The piece doesn’t really point to a hard-and-fast conclusion about how to resolve the situation and that’s more or less the problem:

The day China consumes more, relies less on exports, and accumulates far fewer dollars as a result can’t come soon enough. There’s a certain mutually-assured-destruction quality to our current relationship–Larry Summers calls it the “balance of financial terror”–in which one false move by either side could bring down both economies, and probably the entire global financial system, too. This makes dialogue a necessity. But what it really does is make you pine for a way back from the edge.

As The Atlantic’s James Fallows has pointed out, even if both sides behave responsibly, there’s the persistent risk of miscalculation–or maybe a rumor that triggers a bond market sell-off China didn’t intend. During the cold war, the hotline Kennedy and Khrushchev established was genuinely stabilizing, but it would have been far more stabilizing had the United States and Soviet Union stopped training thousands of nuclear warheads at one another. If, to stick with the analogy, the U.S.­-China relationship is only in the early 1960s, then it’s going to be a long couple of decades indeed.

It strikes me that any rational person looking at how the health care debate has unfolded is going to grow substantially more skeptical about the ability of the United States to pass major legislation in general. What’s more, if you contrast the health care situation with the relative ease with which it was possible to enact debt-financed tax cuts (in 2001 and 2003) and a debt-financed increase in Medicare spending (in 2003) you’re not going to get super-optimistic about the prospects of deficit reducing legislation passing in the future.

Politics

GOP lawmaker displays ‘I am a friend of Joe Wilson’ sign outside his Capitol Hill office. (Updated)

By Amanda Terkel on Sep 15, 2009 at 5:16 pm

Center for American Progress Policy Analyst Ian Millhiser was on Capitol Hill today and noticed that Rep. Jeff Miller (R-FL) is proudly hanging a sign in support of Rep. Joe “You Lie!” Wilson (R-SC):

miller7

Several Republican lawmakers have been rushing to stand by Wilson, including Reps. Steve King (IA) — who defended Wilson’s support for the Confederate flag — and Michele Bachmann (MN) — who thanked God for Wilson.

Update

Moments ago, the House voted 240-179 to formally rebuke Wilson for his outburst during Obama’s speech to Congress. Twelve Democrats voted no, while 7 Republicans voted yes. 5 Democrats voted present, and 10 members didn’t vote.

CSPAN091509173155

Economy

DeMint: Instead Of Regulating Wall Street Banks, We Should Cut Their Taxes

By Pat Garofalo on Sep 15, 2009 at 4:45 pm

Yesterday, President Obama spoke at Federal Hall in New York — right across the street from the New York Stock Exchange — to lay out his vision for reforming the country’s financial regulations. “We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses,” he said. “Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall.”

The regulatory reform effort has encountered stiff opposition in Congress from both the financial services industry and Republicans, who contend that the legislation is “an unwarranted intrusion on markets that could hamper the nascent economic recovery.” But Sen. Jim DeMint (R-SC) went a step further, claiming that instead of looking at better ways to regulate Wall Street, Obama should really be looking for ways to cut Wall Street’s taxes:

Instead of looking at more regulation, we could do a lot by fixing our tax system here in this country, to make us globally competitive. The President needs to focus on what really has caused problems and look at what has really made America so prosperous, and I’m afraid that’s not the lens he’s looking through right now.

Watch it:

So in DeMint’s world, Wall Street placed huge bets on the mortgage market and leveraged itself 40-1 because its taxes were too high? And lowering their taxes would prevent them from ever again imploding the financial system?

Actually, Wall Street banks already pay far below the statutory corporate tax rate of 35 percent by taking advantage of myriad tax credits and write-offs, as well as by sheltering income in low-tax (or no-tax) countries. For instance, Morgan Stanley had an effective tax rate of 21 percent in 2008, which was huge compared to the one percent (yes, one!) that Goldman Sachs paid. And this is by no means a phenomenon restricted to Wall Street, as many U.S. corporations lower their tax rate by ten or twenty points thanks to tax havens and other intricacies of the corporate tax code.

DeMint is espousing the same rhetoric as the CNBC crew, which believes that as long as Wall Street is making money, regulation is unnecessary, and that money-making should be abetted by all aspects of the tax code. But Goldman Sachs made a record breaking $3.44 billion profit in the second quarter of this year, so the tax code doesn’t seem to be holding it back. In fact, the profits that Wall Street is starting to rack up make a financial transactions tax (which levies a small tax on trades and, as Dean Baker pointed out, “would be too small for normal investors to even notice”) something worth exploring.

Politics

Rockefeller Announces He Will Not Support Baucus’ Health Care Bill

By Igor Volsky on Sep 15, 2009 at 4:44 pm

rockThis afternoon, on a conference call with reporters, Sen. Jay Rockefeller (D-WV), a member of the Senate Finance Committee, announced that he would not support Chairman Max Baucus’ (D-MT) health care framework in its current form:

The way it is right now, now we have an amendment process coming up next week. I’ll have many, many, many amendments and we will see what happens on that. But now, there is no way that I can vote for the Senate package. For a lot of reasons. Obviously the lack of a public option is one of them. So that I want to be very clear about.

Listen:

Other Democrats have also expressed concerns about the bill’s affordability standards and financing mechanisms. “The flashpoint is all about affordability,” Sen. Ron Wyden (D-OR) told reporters. “Additional steps have to be taken to make health care more affordable.” Sen. John Kerry (D-MA) “also said he has concerns with the fees Baucus’ proposal would impose on some sectors of the healthcare industry. He did not specify which industries — pharmaceutical, medical device, health insurance or clinical labs — he was most concerned with.”

Meanwhile, the three Republicans participating in the so-called Gang-Of-Six negotiations are also unlikely to support the measure. Sens. Chuck Grassley (R-IA) and Mike Enzi (D-WY) have indicated that they favored smaller bill that does not impose fees on health insurance companies, establishes a five-year waiting period for legal immigrants to obtain coverage, and strictly prohibits “the use of federal money to pay for abortion.” Meanwhile, Sen. Olympia Snowe (R-ME) signaled Tuesday “she is unlikely to immediately support” Baucus’ bill, “but emphasized strongly that she is prepared to jump on board in the coming days.” “I’ll issue my statement tomorrow. But that’s not the end of the process, tomorrow. It’s just the beginning. So, I wouldn’t read too much into it,” Snowe told reporters.

On Sunday, during an appearance on ABC’s This Week, Rockefeller criticized the bill’s “network of cooperatives,” telling host George Stephanopoulos that the provision is not an alternative to the public option. A cooperative “really doesn’t work on health care,” Rockefeller explained. “There are fewer than 20 in the country and there are only two that really work. … So it hasn’t had a future, it goes back to the 30s and 40s, and I don’t think you can take the chance. You have to start a national thing all the way up,” he said.

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