Beck claims he ‘hated’ Bush for starting the bailouts.
Beck claims he ‘hated’ Bush for starting the bailouts.
Today on his Fox News show, Glenn Beck tried to show that his criticism is principled and bipartisan. He said that while President Bush did have czars, they weren’t “crazy people” — like President Obama’s appointees. To show that he doesn’t see political party, he pointed to his dislike of Bush’s $700 billion bailout:
He [Obama] will say that Bush started us down the path toward socialism, and he’d be right by that. Bush started the crazy spending. He would be right again. Bush started the bailouts. Yes, he did — hated him for it.
Watch it:
While Beck did come to have reservations about Bush’s bailout (because it allowed the Treasury Secretary to “expand this in any direction he feels is necessary”), he actually initially supported it. What he said on Sept. 22, 2008:
But these are anything but normal times. I thought about it an awful lot this weekend, and while it takes everything in me to say this, I think the bailout is the right thing do.
The “REAL STORY” is the $700 billion that you’re hearing about now is not only, I believe, necessary, it is also not nearly enough, and all of the weasels in Washington know it.
In that same segment, Beck called Treasury Secretary Henry Paulson “immortal.”
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Despite Beck’s anti-federal spending rhetoric, he initially supported Bush’s $700 billion bailout.
Despite Beck’s anti-federal spending rhetoric, he initially supported Bush’s $700 billion bailout.
Much of Fox News host Glenn Beck’s appeal is his populist, anti-government rhetoric, which gained extra traction during the federal government’s financial bailouts. “Wall Street owns our government,” Beck declared in July. “Our government and these gigantic corporations have merged.” A couple of weeks later, he “mockingly replaced the stars on the American flag with the logos of corporate giants like G.E., General Motors, Wal-Mart and Citigroup.” But the blog Another War of Jenkins’ Ear points out that Beck — while appearing on CNN Headline News — actually voiced his support for President Bush’s $700 billion bailout:
But these are anything but normal times. I thought about it an awful lot this weekend, and while it takes everything in me to say this, I think the bailout is the right thing do.
The “REAL STORY” is the $700 billion that you’re hearing about now is not only, I believe, necessary, it is also not nearly enough, and all of the weasels in Washington know it.
Sunday Show Panelists Claim That Obama Has Never ‘Opposed His Liberals’
Sunday Show Panelists Claim That Obama Has Never ‘Opposed His Liberals’
Yesterday, panelists on both ABC’s This Week and Fox News Sunday uniformly asserted that President Obama never does anything to upset “his liberals.” (Amusingly, ABC and Fox both forgot to include an actual liberal on their panels.) ThinkProgress has compiled a brief montage of their claims. Watch it:
Such claims that Obama never defies progressives may accurately reflect the views of right-wing activists and Beltway pundits, but they have no basis in reality:
- Stimulus: Progressive economists — including at least one Nobel Prize winner — warned that the President’s stimulus package was too small to lift the sinking economy. Similarly, progressives consistently warned the President not to replace highly-stimulative spending with ineffectual tax cuts. Nevertheless, the President rejected progressive pleas for a more substantial package and brokered a deal with made tax cuts almost one-third of the stimulus. Obama allowed much of its final form to be dictated by a handful of Senate Republicans.
- Bank Nationalization: Many progressives unsuccessfully urged Obama to nationalize the failing banks, rather than risk making future bailout payments to an industry whose recklessness nearly destroyed the nation’s economy.
- Cap and Trade: Many of President Obama’s campaign promises for a robust cap-and-trade system have been watered down by a coalition of so-called “Brown Dog” Democrats loyal to Big Coal.
- Single-Payer: The House Progressive Caucus prefers a single-payer system to the almost-exclusively private insurance-driven system proposed by the President.
- Judicial Nominations: President Bush stacked the federal courts with young right-wing ideologues — one of whom even compared Social Security to “cannibalism.” President Obama’s nominees, however, have been older and far more moderate than President Bush’s, and at least one has been actively opposed by disability rights advocates.
- Executive Power: President Obama embraced several Bush-era assertions of power, including signing statements and aggressive use of the state secrets doctrine to avoid disclosing information in court.
- Torture: President Obama initially opposed a commission to investigate Bush-era torture policies. His Administration also opposes prosecuting Bush Administration officials guilty of torture.
- GLBT Rights: Despite campaign promises to repeal bigoted laws like DOMA and Don’t Ask/Don’t Tell, President Obama is “moving slowly” in carrying out this promise. This, despite the fact that Obama has the power to unilaterally suspend DADT.
None of this means that Obama is a bad president. To the contrary, his economic policies are beginning to pull the nation away from the brink of an economic collapse caused by decades of right-wing policy, and his health care plan will protect millions of Americans from the insurance industry’s tactics.
If anything, the Obama Administration teaches that even an effective President must constantly be pressured to keep his promises. Although Obama has yet to make a big push on GLBT rights, pressure from gay rights groups convinced him to grant benefits to the same-sex partners of federal employees and to pledge to overturn DADT by the end of his first term. Similarly, under pressure from progressives, President Obama tacitly endorsed a torture commission and agreed that Attorney General Holder should have discretion to confront past abuses. And the President backed off plans to nominate a CIA Director opposed by many progressives because of concerns about his views on torture.
Simply put, these Sunday show pundits have an axe to grind against “liberals.” But the reality of the Obama Administration’s actions thus far is one that defies such simple-minded criticisms.
Jindal Tours Louisiana Attacking ‘Washington Spending’ While Handing Out Jumbo-Sized Stimulus Checks
Jindal Tours Louisiana Attacking ‘Washington Spending’ While Handing Out Jumbo-Sized Stimulus Checks
Gov. Bobby Jindal (R-LA) has been touring his home state of Louisiana for what he calls a “Louisiana Working” tour to promote “jobs, jobs and jobs. That must be our No. 1 priority.” On the tour, Jindal is giving stump speeches decrying “Washington, D.C. and other officials” for seeking to “spend more money” during an economic downturn.
Indeed, on Monday, Jindal declared the American Recovery and Reinvestment Act to be a failure, calling it a “stimulus that has not stimulated.” In local Louisiana newspapers, Jindal touted his administration’s intent to “not run things here in Louisiana the way they do in Washington.”
As he travels to each community, Jindal has been gaining many positive headlines by sponsoring press events where he gives out jumbo-sized checks to towns and parishes. Below is a picture compilation of checks Jindal has presented to Louisiana communities such as Lafayette, Terrebonne Parish, St. Landry Parish, and Vernon Parish:
Despite the fact that the checks contain millions of dollars of Recovery Act funds for job training programs, housing assistance programs, homelessness prevention programs, police training, criminal justice technology upgrades, and community development block grants, Jindal has been printing his own name on the checks and taking credit for the money. For example, Jindal presented Lafayette with yet another jumbo-sized check that contained at least $2,125,584 in Recovery Act funds. Though the money came from spending policies authorized by the Recovery Act, Jindal did not appear to credit the Recovery Act at all. And although the state stands to gain nearly $8 billion in federal funding from the Recovery Act, Jindal was one of several GOP governors to try to block the measure earlier this year.
While Jindal knocks Washington spending as he builds his national profile, he is shoring up his local support by spending Washington money.
TARP Inspector General Debunks His Own False $23 Trillion Bailout Estimate
TARP Inspector General Debunks His Own False $23 Trillion Bailout Estimate
Yesterday, TARP Inspector General Neil Barosky released a report which crudely tallied up the cost of every economic rescue program proposed during the current crisis — including those that have been discontinued or never even began — to state that the total scope of all financial rescue programs comes to about $23.7 trillion. Cable news hosts ran wild with the report, using it to claim that taxpayers will “ultimately” wind up paying $23 trillion in “bailouts.”
The number continued to be cited on cable last night and this morning, with Fox News even claiming that $23 trillion will be the final cost of TARP alone. But Barofsky himself appeared on CNN to explain that the actual outstanding amount for the financial rescues is closer to $3 trillion, including loans that have yet to be repaid. Watch a compilation:
Barofsky’s report clearly states that “these numbers may have some overlap, and have not been evaluated to provide an estimate of likely net costs to the taxpayer”:
[S]ome of the programs have been discontinued or even, in some cases, not utilized. As such, these total potential support figures do not represent a current total, but the sum total of all support programs announced since the onset of the financial crisis in 2007.
But this doesn’t go far enough in explaining how unlikely we are to ever come close to spending so much money. As Floyd Norris explained in the New York Times, Barofsky’s estimate “assumes that every home mortgage backed by Fannie Mae or Freddie Mac goes into default, and all the homes turn out to be worthless. It assumes that every bank in America fails, with not a single asset worth even a penny. And it assumes that all of the assets held by money market mutual funds, including Treasury bills, turn out to be worthless.” If this doomsday economic scenario were ever to occur, the American currency would be rendered worthless.
Media Matters pointed out that both USA Today and the CBS Evening News used the same misleading number. And as Norris put it, publishing such a meaningless number makes Barofsky seem like nothing more than “an irresponsible headline hunter.”
Cross-posted on The Wonk Room.
CNBC’s Larry Kudlow defends corporate greed in debate with TP’s Faiz Shakir.
CNBC’s Larry Kudlow defends corporate greed in debate with TP’s Faiz Shakir.
Last night on CNBC, ThinkProgress editor-in-chief Faiz Shakir debated CNBC host Larry Kudlow about a front-page story in the Wall Street Journal which revealed that the CEOs of banks receiving government bailout money are expensing travel on private jets for personal vacations. “I think it’s great because I want to stimulate the economy,” Kudlow said of taxpayer-funded private jet trips by bank CEOs. “I want to help the resorts. … I’m glad the CEOs are going around. I just wish they’d take me with them.” Faiz responded:
I do have a problem when they’re taking taxpayer money. Larry, you hate paying taxes. I understand that. But if there’s one thing you hate more than paying taxes, it’s seeing those taxpayer dollars go to waste. And that’s what’s going on here.
Watch it:
Shelby tries to blame Obama for bank bailouts that happened ‘last fall.’
Shelby tries to blame Obama for bank bailouts that happened ‘last fall.’
This morning on Fox News Sunday, host Chris Wallace asked Sen. Richard Shelby (R-AL) why he believes the Obama administration is “taking us down the road to socialism.” Shelby said it was “obviously” the case, and pointed to last fall’s bank bailouts as the prime example:
WALLACE: Sen. Shelby, you say that the Obama administration is taking us down the road to socialism. Explain.
SHELBY: Well, obviously. So, they intervene last fall in the bank crisis. No one has ever done it on that scale before. Now the automobile crisis.
Shelby seemed to catch himself moments later, saying, “you have to go back to the Bush administration. They started it.” Watch it:
ABC News: GM’s Rick Wagoner will receive a $20 million retirement plan.
ABC News: GM’s Rick Wagoner will receive a $20 million retirement plan.
ABC News reports that Rick Wagoner, outgoing CEO of General Motors, will be eligible to collect $20 million in retirement benefits from GM, the company that lost tens of billions of dollars under Wagoner’s leadership:
Upon his departure, Wagoner becomes eligible for both a “Salaried Retirement Plan” and an “Executive Retirement Plan” with General Motors. The combined value of the plans at the end of last year was $20.2 million, a GM spokesperson confirmed.
“Most of that will be paid out as an annuity over five years, the remainder is a small lifetime annuity,” said GM spokeswoman Julie M. Gibson.
However, the Washington Post reported this morning that Wagoner would not be leaving GM immediately, “because if he leaves the company he is entitled to a multimillion-dollar pension that the government does not want to pay.” Additionally, under the already-standing TARP agreement between GM and the Treasury Department, GM Is not allowed to pay severence fees to senior executives. “That ban does not appear to apply to retirement benefits, however.”
Republican Lawmakers Who Opposed Salary Caps Last Month Are Now Attacking AIG Bonuses, Part II
Republican Lawmakers Who Opposed Salary Caps Last Month Are Now Attacking AIG Bonuses, Part II
As ThinkProgress noted yesterday, Republicans who opposed Wall Street salary caps, such as Senate Minority Leader Mitch McConnell (R-KY) and Senate Banking Commitee ranking member Richard Shelby (R-AL), are now flipping their positions to condemn the bonuses paid by AIG. Last night, McConnell made the rounds on cable television to misleadingly suggest that he has always favored salary caps.
But McConnell and Shelby are not the only Republican lawmakers pushing this deception. Rep. Peter King (R-NY), Sen. Kit Bond (R-MO), and Sen. James Inhofe (R-OK) also are hypocritically altering their views:
Q: “Should Congress, should the White House be getting a way for these contracts to be broken?”
KING: “Congress should find a way to do it or the administration should lean on them in a way to get – to have it done.” [MSNBC, 3/17/09]BOND: “It’s unacceptable to pay bonuses after the American taxpayer was forced to bail out an institution without reforming it.” [KRCG, 3/18/09]
INHOFE: “The AIG situation is clear evidence of what happens when you shovel money out the door with no strings attached and no transparency.” [KTUL, 3/17/09]
Only a month ago, King argued against strong provisions to ensure executive salaries were capped:
KING: “No, I will say, I agree there should have been some caps. I think this went too far, and I think it can be counterproductive.” [ABC News, 2/15/09]
Last month, Bond sharply criticized a bill offered by Sen. Claire McCaskill to limit the salary of executives at companies receiving federal bailout money to no more than what the president of the United States makes — $400,000 a-year:
BOND: “The worst thing we can do is tell businesses how to run themselves. Congress has a pretty bad track record. If you you look at our collective judgment, all 535 of us in our wisdom can’t run government very well. (We) sure can’t run business.” [STL Today, 2/2/09]
While Inhofe today demands “strings attached” to federal bailout money, he expressed the opposite in February:
INHOFE: “I thought, is this still America? Do we really tell people how to run [a business], and who to pay and how much to pay?” [Huffington Post, 2/6/09]
Former Speaker Newt Gingrich today penned an op-ed venting his “outrage” at the “fat bonuses” paid to staffers at AIG. However in November, while speaking with Fox News’ Sean Hannity, he attacked Rep. Henry Waxman (D-CA) for having the audacity to send “off letters to every bank demanding to know all of their executive compensation policy.” Gingrich then scoffed at the idea of capping salaries specifically at AIG:
GINGRICH: “You have a level of micromanagement of AIG and others. You can’t apply Washington bureaucratic rules to a free market company without ultimately destroying the company.” [Fox News, 11/12/08]
Hypocrisy abounds.
Liddy: Bernanke and the Federal Reserve approved of bonuses in advance.
Liddy: Bernanke and the Federal Reserve approved of bonuses in advance.
Testifying before Congress today, AIG CEO Gordon Edward Liddy said that the Federal Reserve was aware the bonuses would be paid out and “acquiesced in that decision.” In fact, Liddy claimed that Federal Reserve members were present at AIG’s “compensation committee meetings” with the ability to say “yea or nay”:
REP. KANJORSKI (D-PA): Am I to understand that you’re saying that Chairman Bernanke or his designated person at the Federal Reserve was informed that you were going to make these payments and acquiesced in that decision?
LIDDY: Yes, everything we do, we do in partnership with the Federal Reserve. The Federal Reserve is at our board meetings and our compensation committee meetings and our various meetings on strategy and they have the ability to weigh in — either yea or nay — on anything that we decide.
Watch it:
Rep. Mike Castle (R-DE) later asked for clarification on whether the Fed “did not say nay as far as the bonuses were concerned.” Liddy replied that “there was great angst over the payment of these bonuses,” but that the Fed and AIG ultimately decided that “the risk was too great that we would lose all the progress we made if we didn’t pay these bonuses.”
McConnell misleadingly suggests he favored Wall Street salary caps.
McConnell misleadingly suggests he favored Wall Street salary caps.
This afternoon on CNN, Senate Minority Leader Mitch McConnell (R-KY) pretended as though he had favored capping the salaries of bankers whose firms accepted TARP funds, claiming that his position has been that bailed-out companies “are going to have to operate in a different sort of way.” When host Wolf Blitzer asked whether Congress should have passed salary caps on bailout recipients, McConnell acts as though he had been in favor of such a proposal:
BLITZER: Should the Congress — and you are the leader of the Republicans in the Senate — have passed salary caps on these bailed out companies?
McCONNELL: We certainly had a chance with the amendment by Senator Snowe to prevent this kind of bonuses from being paid. But look, the day-to-day responsibility of oversight of TARP funds is at the Treasury Department.
Watch it:
McConnell is certainly right: Congress did have a chance to pass salary caps. However, he opposed such a move at the time, telling ABC News, “I really don’t want the government to take over these businesses and start telling them everything about what they can do. … We have to resist the temptation to basically dictate to these businesses how to run every aspect of their operation.” On CNN today, McConnell accused AIG of “trying to have it both ways.” Pot, meet kettle.
Republicans Who Opposed Wall Street Salary Caps Last Month Now Condemning ‘Outrageous’ AIG Bonuses
Republicans Who Opposed Wall Street Salary Caps Last Month Now Condemning ‘Outrageous’ AIG Bonuses
As outrage mounts over the $165 million in executive bonuses paid to AIG staffers, many Republicans are trying to tap into the widespread public anger by striking uncharacteristically populist tones. Senate Minority Leader Mitch McConnell (R-KY) and Senate Banking Commitee ranking member Richard Shelby (R-AL) have said the following in recent days:
MCCONNELL: “Well, it is an outrageous situation. I wrote Secretary Paulson back in October complaining about the way AIG had been doing its business. […] This is an outrage.” [ABC News, 3/15/09]
SHELBY: “We ought to explore everything that we can through the government to make sure that this money is not wasted. [...] A lot of these people should be fired, not awarded bonuses. This is horrible. It’s outrageous.” [AP, 3/16/09]
However, when Congress debated limiting executive pay last month, these same key Republican lawmakers stood firm in opposing such caps. McConnell argued against the “temptation” to “dictate” business practices when it comes to salaries and bonuses:
MCCONNELL: “I really don’t want the government to take over these businesses and start telling them everything about what they can do. [...] We have to resist the temptation to basically dictate to these businesses how to run every aspect of their operation.” [ABC News, 2/4/09]
Similarly, Shelby demanded a laissez-faire approach to executive compensation as Congress pressed Secretary Paulson for details of the bailout plan:
SHELBY: “It should be up to the board of directors of a private corporation to set the compensation of an executive; it shouldn’t be Congress’s role.” [Washington Post, 9/23/08]
Not all conservatives have backtracked from their previous positions on executive compensation. Rush Limbaugh, on his program yesterday, said, “I am all for the AIG bailouts, and I am all for the AIG bonuses. Well, I’m not for the bailouts, well, in a way I’m for the bailout because I’m for the bonuses.”
Rep. Eric Cantor (R-VA), on the other hand, says he simply feels “outraged” but is not yet walking back what he said in September on opposing salary caps: “I’m not necessarily advocating going forward, that the federal government be able to set salaries across the board for any company.”
Barney Frank: It’s ‘Nonsensical’ To Retain AIG Employees To Undo The Mess They Created
Barney Frank: It’s ‘Nonsensical’ To Retain AIG Employees To Undo The Mess They Created
On the front page of the New York Times’ business section today, economic writer Andrew Sorkin argued in favor of paying out the AIG bonuses. He cited “the sanctity of contracts” to warn that “the business community” would panic if the government started “abrogating contracts left and right.” He also claimed that the bonuses were necessary to retain AIG employees, who are needed to turn the economy around: “A.I.G. built this bomb, and it may be the only outfit that really knows how to defuse it.”
This morning, ThinkProgress sat down with Rep. Barney Frank (D-MA), who chairs the House Financial Services Committee and has called for the firing of AIG executives. When asked to respond to Sorkin’s claim that only AIG employees can navigate the economy out of the mess they created, Frank dismissed it as “nonsensical”:
That’s nonsensical. It’s clear they made a lot of mistakes and we need to undo what they did. If they really understood what they did in the first place, seriously, they probably wouldn’t have done much of it. Secondly, when you are trying to undo something, it is often not the case that the people who did it are the ones to put in place. People are sometimes committed to not admitting mistakes. … So that argument I think is in fact almost counter, because the argument that you take the people who made the mistake and put them in charge of undoing the mistake goes against the human impulse not to admit a mistake.
Watch it:
Sorkin also effectively endorsed AIG executives holding the American taxpayer hostage, saying that if they are fired, they “might simply turn around and trade against A.I.G.’s book”:
So as unpalatable as it seems, taxpayers need to keep some of these brainiacs in their seats, if only to prevent them from turning against the company. In the end, we may actually be better off if they can figure out how to unwind these tricky investments.
Though Sorkin seems to have no problem with such a hostage situation, it is clearly part of the “perverse incentives” he discussed with Rachel Maddow last night: “If a deal makes money for the company, they make extra money. But if it loses money they don’t lose anything.” Apparently the New York Times’ chief financial journalist has no problem with this perversity.
Grassley clarifies his call for AIG execs to commit suicide: I want ‘contrition,’ ‘remorse,’ ‘full responsibility.’
Grassley clarifies his call for AIG execs to commit suicide: I want ‘contrition,’ ‘remorse,’ ‘full responsibility.’
Angered over the AIG’s decision to dole out bonuses to its top employees, Sen. Chuck Grassley (R-IA) yesterday caused a stir when he suggested the company’s executives should follow “the Japanese example” and resign or kill themselves. Grassley appeared this morning on Bloomberg TV, where he was given a chance to clarify his views. “Of course I don’t want anyone to go commit suicide,” he said. “But I do want some contrition. I want showing of remorse. I have not heard a single apology from a single Wall Street CEO.” He continued:
In the case of the Japanese, you know, they do one of two things. They either go commit suicide or they take a deep bow and say apologies and then sometimes resign. But they take full responsibility. And we’re not hearing that.
And obviously, I don’t want anyone to kill themselves because I don’t believe in that sort of thing. But I do believe that when you have done bad for your company, for your stockholders, and eventually for the taxpayer…you ought to say I’m sorry.
Watch it:
Responding to Grassley’s comments from yesterday, AIG spokesman Nick Ashoosh told MSNBC, “The remark is very disappointing. But AIG’s employees continue to work with poise and professionalism to take care of policyholders and repay taxes.”
Why Are AIG’s Contracts Sacrosanct But Not Union Workers’ Contracts?
Why Are AIG’s Contracts Sacrosanct But Not Union Workers’ Contracts?
Yesterday on ABC’s This Week, Larry Summers, head of President Obama’s National Economic Council, called insurance giant AIG’s plan to pay out $165 million in bonuses “outrageous” but insisted there was little the government could do about it. This despite the $170 billion in taxpayer funds that have been given to AIG. Summers cited the sanctity of contracts:
SUMMERS: We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system.
Summers said that efforts by Treasury Secretary Tim Geithner had successfully “scaled back” the bonuses, but AIG chief Edward Liddy, defending the bonuses, told Geithner, “quite frankly, AIG’s hands are tied.”
Of course, not all contracts are sacrosanct. When Detroit’s Big Three arrived in Washington last year to plead for federal bailout funds, the right wing demanded that the United Auto Workers ignore their contracts and accept “steep cuts in pay and benefits” — on top of the cuts they already shouldered in 2007. The UAW agreed to “make major concessions in its contracts,” acceding to most of the right’s demands:
UAW President Ron Gettelfinger emerged from the meeting to say the union would rework a retiree health care trust fund, eliminate the union’s maligned jobs bank program…and cut additional measures that would loosen the union’s trademark job-security protections.
Along with other commenters, the American Prospect’s Robert Kuttner pointed out the government’s double standard on contracts, telling George Stephanopoulos yesterday, “You don’t think when the auto workers come in as part of the auto rescue deal, they’re not being asked to abrogate contracts? Of course they are.”
The Obama administration also supports rewriting mortgage contracts. It “has moved aggressively to pressure lenders to renegotiate the terms of mortgages,” and Obama supports an idea to allow bankruptcy judges to change the terms of a mortgage to help homeowners stay afloat.
To his credit, Obama today ordered Treasury Secretary Tim Geithner “to use that leverage and pursue every single legal avenue to block these bonuses.” But it’s still clear that while workers’ contractual benefits can be eviscerated in the name of bailout eligibility, millionaire bankers’ bonuses are a more sacrosanct part of “a country of law” where “there are contracts.”
Perino claims Bush was responsible for last week’s stock market climb.
Perino claims Bush was responsible for last week’s stock market climb.
Since he was elected, conservatives have been faulting Barack Obama for the collapse in the stock market. But last week, the market posted gains for four straight days. According to former White House Press Secretary Dana Perino, the man most responsible for the stock market’s climb last week was…President Bush. HuffPost’s Sam Stein notes that, on C-Span yesterday morning, Perino offered this explanation:
“You were just speaking earlier about the possibility that since we had a little bit of a better week on Wall Street does that spell a turnaround?” Perino said. “Can all the credit go specifically to President Obama? Well, I would say no. We are just going to have to take a while to let all of this settle down and let the policies that our administration and the new administration are trying to put in place have a chance to work.”
Watch it:
Steve Benen responds, “Putting aside whether watching Wall Street is a useful guide to measuring the strength of economic policies — it clearly isn’t — the point to remember is that positive developments are evidence of Republican wisdom, and negative developments are evidence of Democratic failure.”
Bailed-out AIG doles out $165 million in bonuses.
Bailed-out AIG doles out $165 million in bonuses.
Insurance giant American International Group, which has received $170 billion in funds from the government to stay afloat, will award about $165 million in employee bonuses. The U.S. government has an 80 percent ownership stake in the company. Treasury Secretary Tim Geithner had urged AIG’s chief Edward Liddy to renegotiate the payments, but Liddy said he had “grave concerns” about the impact on the firm’s ability to retain talented staff. Liddy’s recommendation has “outraged” the Obama administration:
The senior government official, who was not authorized to speak on the record, said the administration was outraged. “It is unacceptable for Wall Street firms receiving government assistance to hand out million-dollar bonuses, while hard-working Americans bear the burden of this economic crisis,” the official said.
The payments “are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation.”
Bailed-out bank eliminated 450 jobs and then spent millions on lavish parties in LA.
Bailed-out bank eliminated 450 jobs and then spent millions on lavish parties in LA.
Northern Trust received $1.6 billion in bailout funds and announced in December that it was eliminating 450 jobs because “the macroeconomic environment has been extraordinarily difficult.” But as TMZ reports, that hasn’t stopped the bank from spending “a fortune last week in L.A. hosting a series of lavish parties and concerts with famous singers”:
Northern Trust, a Chicago-based bank, sponsored the Northern Trust Open at the Riviera Country Club in L.A. We’re told Northern Trust paid millions to sponsor the PGA event which ended Sunday, but what happened off the golf course is even more shocking.
Northern Trust flew hundreds of clients and employees to L.A. and put many of them up at some of the fanciest and priciest hotels in the city. We’re told more than a hundred people were put up at the Beverly Wilshire in Bev Hills, and another hundred stayed at the Loews Santa Monica Beach Hotel. Still more stayed at the Ritz Carlton in Marina Del Rey and others at Casa Del Mar in Santa Monica.
Northern Trust said in a statement that the parties were funded through “our normal cash flow,” not bailout funds. But lawmakers are having none of it. Sen. John Kerry (D-MA) called it “insulting” and “disgusting.” Rep. Barney Frank (D-MA), chairman of the House Financial Services Committee, said that the bank should “pay the government back for the money it spent.”
If Not Nationalization, Then What?
If Not Nationalization, Then What?
The question that everyone seems to be asking about the Obama administration’s plan for the financial system is: “Should the United States nationalize some banks?”
There’s been a chorus of calls for nationalization — from Paul Krugman and Nouriel Roubini to Alan Greenspan and Lindsey Graham — which thus far the Obama administration has resisted. As Roubini noted, however, the “stress test” that Treasury Secretary Timothy Geithner proposed in his financial stability plan naturally leads to nationalization:
[T]he reality is that Mr. Geithner is going to confirm the insolvency of the financial system. Once we face this truth, there really isn’t much left to do but nationalize. We are not talking about the government operating the banks for the long-term. But, as was done in Scandinavia in the early 1990s, we are talking about orderly clean up, then reselling the banks to private investors.
Of course, there is the question of the political viability of nationalization. Obama has argued that “America’s different,” and won’t stand for nationalization. And as The Hill noted, federal ownership of troubled banks would play into false claims that Obama is a socialist.
But if not nationalization, then what? Geithner’s public-private investment fund may get toxic assets off the banks’ books, but nationalization is a more straightforward process, and doesn’t depend on Wall St. being willing to buy the junk currently clogging up the banks. And the longer nationalization is delayed, the longer the solvency of the entire banking system will be in question. Thus, more good banks will get dragged down into the mud with the bad.
As Michael Hitzik wrote of the banks, “We bought them. We own them. The only problem is that we’ve failed to exercise our right to control them.” Indeed, another benefit of nationalizing is the opportunity to wipe the bank’s management slates clean. But if nationalization occurs, it needs to be done in a quick manner. There’s danger in allowing the banks to sit on the government’s hands for too long; “prolonged government intervention in the Indian and Chinese banking systems led to major inefficiencies, which stymied economic growth.”
The administration is currently reassuring banks that nationalization isn’t coming. As Matthew Yglesias wrote, “If I were Tim Geithner, I would keep offering these reassurances to executives at large banks right up until the minute I nationalized the first one.” But if the administration is committed to a plan that doesn’t involve nationalization, then it should lay that plan out, because it’s beginning to look like nationalization is where all roads lead and the public needs to be educated about the alternative.
Cross-posted on The Wonk Room.
The Obama administration has provided few details about its plans to shore up troubled lenders, sowing confusion in the markets and inside the banks about its intentions. With so much uncertainty, some investors are abandoning banking shares, fearing shareholders will be wiped out if the government seizes control. The worry, investors say, is that Washington is running out of time and options. “Banks live on confidence, and there is precious little coming from the new Treasury secretary,” said Gary B. Townsend, a former federal banking regulator who runs his own investment firm, referring to Timothy F. Geithner. “We are getting only confusion.”
Obama to introduce executive pay limits for bailed out companies.
Obama to introduce executive pay limits for bailed out companies.
The Obama administration plans to mandate new executive pay limits for financial companies that are receiving any help from the $700 billion bailout fund. “If the taxpayers are helping you, then you’ve got certain responsibilities to not be living high on the hog,” President Obama said in an interview. Sen. Claire McCaskill (D-MO) has proposed that no employee of a bailed-out company can receive more than $400,000 in total compensation until it pays the money back.
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