Honesty

QOTD, Paul Krugman: But I don’t blame Mr. Obama for leaving some big questions unanswered in this budget. There’s only so much long-run thinking the political system can handle in the midst of a severe crisis; he has probably taken on all he can, for now. And this budget looks very, very good.

QOTD2, hilzoy: It's actually hard to understand how the banks managed to do this badly: you'd think they could have done better hiring people off the street and paying them to put all those nice little loan documents into piles at random, or tossing mortgages down the stairs and bundling them based on how they landed. They certainly didn't need to hire people with advanced math degrees and pay them seven- or eight-figure salaries to get these kinds of results.


Good stuff today. A number of posts on the Obama budget, which has progressives swooning and repugs gnashing, a bank that is too big to fail gets partially digested - and a venal CEO story.

But first, time to point and laugh at a few repuglicans, including the venerable George Will, who is proving that you really can't inject new facts into the conservative brain without them responding by doubling down on what they "know" to be true. Sad, I though tbetter of Will than this.

Joe Sudbay: George Will stands by his discredited global warming column and will regurgitate the same false information in his next column

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Will should spend more time worrying about the veracity of his columns and less time obsessing about men hugging. He's further damaged the already damaged credibility of the Washington Post's editorial pages and the Post has allowed it by standing by their man. Fred Hiatt himself is sticking up for Will, (but probably not hugging him.)

This is beyond disturbing. Will is letting his deeply held partisan views cloud whatever judgment he has left. This is how careers end -- or it should be.

One other thing: If a progressive columnist authored a blatantly false column in the Washington Post, the Republicans on Capitol Hill will be up in arms. There would be speeches and resolutions galore. But, there has been silence from the Democrats over George Will's egregious error and his failure to own up to it. See, many Democrats still think the Washington Post editorial page matters. It doesn't (unless one is worried about being invited to the "right" cocktail parties here in D.C.)

Ahhhhhhhh, To be young, gifted, and conservative. DougJ explains:

This (via Oliver Willis who also describes a Twitter exchange with Joe Scarborough) really cracks me up:

"For much of the past decade, young conservatives enjoyed an array of job opportunities in the Republican-controlled Congress and at insulated, well-funded nonprofit organizations. But since Democrats gained control in 2006, many prized slots on Senate and House committees started going to the new majority. And now, there’s no Republican administration in power to offer jobs to its own.

Young conservatives could apply for regular jobs, they acknowledge…"

...

From JedL (Daily KOS), a little pushback from Matthews.


From Yglesias: Everything you wanted to know about the Obama budget and more from the Center for American Progress policy teams:

1. Dan Weiss on the climate and energy elements.
2. Cindy Brown and Melissa Lazarín on education.
3. Larry Korb on defense.
4. Michael Ettlinger on the big picture.

It’s not Obama’s style to actually say this, but were this budget to be enacted it would be by far the most significant progressive step in over forty years.

Krugman senses a Climate of Change

Elections have consequences. President Obama’s new budget represents a huge break, not just with the policies of the past eight years, but with policy trends over the past 30 years. If he can get anything like the plan he announced on Thursday through Congress, he will set America on a fundamentally new course.

The budget will, among other things, come as a huge relief to Democrats who were starting to feel a bit of postpartisan depression. The stimulus bill that Congress passed may have been too weak and too focused on tax cuts. The administration’s refusal to get tough on the banks may be deeply disappointing. But fears that Mr. Obama would sacrifice progressive priorities in his budget plans, and satisfy himself with fiddling around the edges of the tax system, have now been banished.

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Many will ask whether Mr. Obama can actually pull off the deficit reduction he promises. Can he actually reduce the red ink from $1.75 trillion this year to less than a third as much in 2013? Yes, he can.

Right now the deficit is huge thanks to temporary factors (at least we hope they’re temporary): a severe economic slump is depressing revenues and large sums have to be allocated both to fiscal stimulus and to financial rescues.

But if and when the crisis passes, the budget picture should improve dramatically.
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And even if fundamental health care reform brings costs under control, I at least find it hard to see how the federal government can meet its long-term obligations without some tax increases on the middle class. Whatever politicians may say now, there’s probably a value-added tax in our future.

But I don’t blame Mr. Obama for leaving some big questions unanswered in this budget. There’s only so much long-run thinking the political system can handle in the midst of a severe crisis; he has probably taken on all he can, for now. And this budget looks very, very good.

NYTimes Editorial: President Obama’s Budget: Some Honesty About Taxes — Finally

President Obama’s first budget recognizes what most of Washington has been too scared or ideologically blind to admit: to recover from George W. Bush’s reckless economic policies, taxes must go up.

Mr. Obama’s blueprint, released on Thursday, commits to cutting by more than two-thirds, by 2013, the $1.75 trillion budget deficit that Mr. Bush dumped on the nation.

A credible pledge to reduce the deficit is imperative. Without it, foreign lenders — who financed the Bush-era deficits and are now paying for the stimulus and bailouts — could lose faith in the nation’s ability or willingness to repay in anything other than rapidly depreciating dollars. That would send interest rates up and the economy down, the worst-case scenario. Controlling the deficit is also necessary to sustain a recovery — when it comes.

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Feb. 26: Rachel Maddow is joined by office of Management and Budget director Peter Orzag to talk about Obama's recently revealed budget plan.

Visit msnbc.com for Breaking News, World News, and News about the Economy

K-Tum tells us about A Sign of What's to Come:

... Did you wake up feeling like a titan of Wall Street? You are now the biggest shareholder in one of the country's premier financial institutions. The NYT is reporting that the Treasury Department has reached a deal in which the federal government will take a stake of between 30% and 40% in Citibank.:

The Obama administration deliberately stopped short of securing a majority or controlling interest in Citigroup, but will probably come under intense pressure to take a much larger role in shaping the bank's direction. Taxpayers, after pumping more than $45 billion into the bank, have become Citigroup's single largest shareholder. ...

The move is one of the most drastic steps federal officials have taken to prevent the collapse of an institution deemed “too big too fail,” as its downfall could send shockwaves through the global markets. ...

The Obama administration has tried to keep the banks in private hands and tried to stamp out talk of nationalization. But Citigroup's plunging share price and its deteriorating financial condition made it almost inevitable the government would have to convert its stake.

So now that we own the bank, what should we do with it?

• From the comments:
  
• Elvis Elvisberg Says:
  Friday, February 27, 2009 at 7:03 am

  So we've pumped in $45 billion... and the company's market cap is $13.4 billion.
  -
  Happily, we just happen to have a very recent model of what not to do after a real estate bubble in a wealthy country. Why are we hewing to the script of what not to do? Why aren't we treating this bank like we treat the 4 banks a week the FDIC takes over?
  -
  Bursting bubbles are absolutely no fun at all. But zombie banks-- that's how you get from a recession to a lost decade.

• Chris in Paris: Too big to fail no longer an option Regulation is a good first step though it's only a first step. A year ago, many on the left in finance still bought into the self-regulation garbage but thankfully, they are moving on. It's only the GOP who is left out in the cold on this important issue. What impresses me here is not only is Volcker calling for regulation but he is also calling for international oversight which is critical. Geithner is lagging too far behind on such cooperation but nobody really expected him to be an earth shaker in the first place. ...
  

hilzoy: Now That's What I Call Toxic!

During the past year or so, I have sometimes wondered exactly how toxic all those toxic assets really are. It's hard to tell, since they differ from one another, and are not traded that often. However, the Financial Times (h/t) has some answers:

"..."

If I'm reading this right, within four years of being issued, two thirds of these CDOs are in defaultt, and their recovery rates are very, very low. That's just staggering. It's actually hard to understand how the banks managed to do this badly: you'd think they could have done better hiring people off the street and paying them to put all those nice little loan documents into piles at random, or tossing mortgages down the stairs and bundling them based on how they landed. They certainly didn't need to hire people with advanced math degrees and pay them seven- or eight-figure salaries to get these kinds of results.

And how about those ratings agencies? They would have done a better job using a Magic 8-Ball to rate the CDOs. ("Signs point to junk!")

I have been hearing for years and years about how the financial services sector pays such exorbitant wages because the people who work there are so immensely talented that they are cheap at $50 million a year. I never particularly bought that line before. But I never imagined that all those Masters of the Universe would do quite this badly. If we had paid them $50 million a year to go far, far away and leave our financial system alone, it would have been a bargain.

The column ends with a very important observation:

"Those American officials who are implementing flashy new "stress tests" of banks would do well to take note."

Word.

Chris in Paris: Failed banking CEO insists in keeping $1,000,000 per year pension

Numbers be damned! Really, who gives a damn what legal agreement was agreed upon yesterday when the bloody numbers provided by the bank were a sham? Once again, bank leaders are showing the world why they are irresponsible and deserve nothing less than our collective scorn. Apparently just as banks offered liar loans, they also managed to sign themselves up for liars compensation.