For that reason, I have chosen to err on the side of including all of the information/analysis I find important rather than providing a tantalizing smidgy bit with a link that I hope readers will then maybe follow to actually read the entire post. Most blogs are, by their nature, already very concise and to the point and I often include them in their entirety. I make every effort to prominently highlight the authors the posts, to provide a hyperlink pointer to their sites, and I strongly encourage people to visit them.
Feedback would be most welcome. Is this approach appropriate? Is it fair to the authors?
via John Cole, here's Matt Taibbi:
Yglesias quotes Brad DeLong: Zombie Firms Need Silicon Valley-Style CompensationThe best way to understand the financial crisis is to understand the meltdown at AIG. AIG is what happens when short, bald managers of otherwise boring financial bureaucracies start seeing Brad Pitt in the mirror. This is a company that built a giant fortune across more than a century by betting on safety-conscious policyholders — people who wear seat belts and build houses on high ground — and then blew it all in a year or two by turning their entire balance sheet over to a guy who acted like making huge bets with other people’s money would make his dick bigger.
...
The most galling thing about this financial crisis is that so many Wall Street types think they actually deserve not only their huge bonuses and lavish lifestyles but the awesome political power their own mistakes have left them in possession of. When challenged, they talk about how hard they work, the 90-hour weeks, the stress, the failed marriages, the hemorrhoids and gallstones they all get before they hit 40.“But wait a minute,” you say to them. “No one ever asked you to stay up all night eight days a week trying to get filthy rich shorting what’s left of the American auto industry or selling $600 billion in toxic, irredeemable mortgages to ex-strippers on work release and Taco Bell clerks. Actually, come to think of it, why are we even giving taxpayer money to you people? Why are we not throwing your ass in jail instead?”
But before you even finish saying that, they’re rolling their eyes, because You Don’t Get It. These people were never about anything except turning money into money, in order to get more money; valueswise they’re on par with crack addicts, or obsessive sexual deviants who burgle homes to steal panties. Yet these are the people in whose hands our entire political future now rests.
Good luck with that, America. And enjoy tax season.
- Read the whole TAIBBI thing at The Big Takeover:
The global economic crisis isn't about money - it's about power. How Wall Street insiders are using the bailout to stage a revolution
I think Brad DeLong has hit upon the right answer of what we need to do about compensation at AIG and firms in need of TARP money:
The engineers of Silicon Valley startups are significantly smarter and work a lot harder than do the traders of Wall Street. Some of the engineers of Silicon Valley make fortunes: they are compensated with relatively low salaries and large restricted equity stakes in the startup businesses they work for, and so if the businesses do well they do very well indeed–in the long run, in the five to ten years it takes to assess whether the business is in fact going to be a viable and profitable going concern. And the engineers of Silicon Valley have every incentive to use all their brains and all their hours to make their firm viable and successful: they get their cash only at the end of the process. They don’t get big retention bonuses if they stick around until the end of a calendar year. They don’t get big payouts if they report huge profits on a mark-to-market basis.
The traders of Wall Street, by contrast, get their money largely up front. If the mark-to-market position is good, they get paid–even though it is almost surely the case that nobody has tried to actually sell the entire position to somebody else. If the strategy produces short-run profits, they get paid–even though not nearly enough time has passed for anybody to be able to assess what the risks involved in the strategy truly are. They get “traders’ options”–we claim that we have made you a lot of money, we claim that the positions and strategies we have left you, the stockholders, with are sound, we claim that we have correctly managed our risks–but we are not interested in putting our own personal money where our mouths are but instead we insist on getting our fortunes up front.
The failure of the major institutions of Wall Street to adopt Silicon Valley compensation schemes in the 1980s and 1990s was always a great worry to regulators and policymakers. The strong view was that the venture capitalists of Silicon Valley knew what they were doing and were acting as prudent and responsible agents of their investors when they insisted on SVCS for their startups. So why didn’t the shareholders of the major banks do the same with their traders, quants, and strategists? The decisive argument in regulatory and policymaker bull sessions about this issue was that this was the shareholders’ business–that if the shareholders of these companies thought that there was good reason to elect board members and CEOs who did not impose SVCSs, the government should be cautious about stepping in. And the argument that “maybe the shareholders know of some good reason not to adopt SVCSs” no longer applies: we are the shareholders, we know of no reason, and we see no reason not to align the interests of our employees at AIG and at TARP-receiving companies with the long-run interests of the U.S. Treasury.
Therefore: punitive taxes on excessive immediate cash payouts paid by TARP and other government financial commitments are, I believe, completely appropriate. But thou shalt not bind the mouths of the kine that tread the corn: traders and financial executives who are willing to work very hard for what are now government-owned enterprises should be offered the carrot of long-term restricted equity stakes: that if they do their jobs well and if the government makes a healthy return because of their skill, forethought, and diligence, they should make healthy returns as well.
Punitive taxes on compensation that takes the form of long-term restricted equity stakes is a dangerous and destructive move. If the compensation bill that emerges from the conference committee does not allow TARP-receiving companies to offer such SVCSs, then Obama should veto it.
And if the traders of Wall Street then quit en masse? If they say that they are going to “Go Galt” if they don’t get their traders’ options to take the money upfront after assuring us shareholders that they have made us a lot of money, that their positions and strategies are sound, and that they have prudently managed the risks? Well, then that tells us something about what they really think the true value of their work product has been.
The Senate can and should step in here and offer a bill of this sort. That would take the worthy impulse behind the House bill and temper it in a more workable, more constructive way.
Yglesias: Quote of the Day
Kevin Drum quotes Charles de Gaulle:
“The cemeteries of the world are full of indispensable men.”
His larger point is how very unlikely it is that it’s genuinely true that only the people who screwed up the financial system and their buddies are competent to fix it. This is what the culprits in a financial crisis always say and the role of the United States when these things happen in a developing country is to try to kick butt a bit, and get the country in question to see that it needs to crack down on its financial elites not further indulge them. Now it’s our turn, and the best advice is still the same even if there’s no international institution that’s going to make us do it.
TPM's Elana Schor. Rep. Sherman Squares Off With Pro-Wall Street CNBC Host
atrios happens to mention that They Are Bastards. Which is the important point. The issue is that Timmeh and friends never distinguished between bailing out the system and bailing out the players. There was a way to do that, and they didn't do it.
- -Attaturk "Those poor people, so rich and so white." - presumed future Wolf Blitzer quote.
- Atrios What Krugman Said. This has been another edition of what Krugman said.
- Krugman: AIG
Preliminary thoughts on the tax bill:
1. It’s not the way you should make policy — it’s clumsy, and it will punish some innocent parties while letting the most guilty off scot-free
2. But — there wasn’t much alternative at this point. And for that I blame the Obama people.
I’ll leave to others the question of who knew or should have known that the bonus firestorm was coming; but it’s part of a pattern. At every stage, Geithner et al have made it clear that they still have faith in the people who created the financial crisis — that they believe that all we have is a liquidity crisis that can be undone with a bit of financial engineering, that “governments do a bad job of running banks” (as opposed, presumably, to the wonderful job the private bankers have done), that financial bailouts and guarantees should come with no strings attached.
This was bad analysis, bad policy, and terrible politics. This administration, elected on the promise of change, has already managed, in an astonishingly short time, to create the impression that it’s owned by the wheeler-dealers. And that leaves it with no ability to counter crude populism. - Jed L - AIG sues U.S. government for $306 million.
Just when you couldn't stand to hear another thing about AIG, this comes out:
A.I.G. Sues U.S. for Return of $306 Million in Tax Payments
While the American International Group comes under fire from Congress over executive bonuses, it is quietly fighting the federal government for the return of $306 million in tax payments, some related to deals that were conducted through offshore tax havens.
A.I.G. sued the government last month in a bid to force it to return the payments, which stemmed in large part from its use of aggressive tax deals, some involving entities controlled by the company’s financial products unit in the Cayman Islands, Ireland, the Dutch Antilles and other offshore havens.
A.I.G. is effectively suing its majority owner, the government, which has an 80 percent stake and has poured nearly $200 billion into the insurer in a bid to avert its collapse and avoid troubling the global financial markets. The company is in effect asking for even more money, in the form of tax refunds. The suit also suggests that A.I.G. is spending taxpayer money to pursue its case, something it is legally entitled to do. Its initial claim was denied by the Internal Revenue Service last year.
I bet if the lawyers win the case they'll ask for a bonus.
- Yglesias: Missing: Eliot Spitzer
Michael Hill writes for the AP about Elliot Spitzer’s long struggle with AIG, his return to the spotlight, and the dim prospects for a Spitzer comeback: “It would be a long shot. The trail for a married politician caught soliciting high-priced prostitutes would likely be prohibitively steep.”
I have to say that I don’t really understand this. If soliciting prostitutes doesn’t ruin your career in Louisiana politics, why should it ruin your career in New York politics? Spitzer’s decision to resign has always struck me as basically just a case of blinking. I remember when the Monica Lewinsky story broke, and a lot of pundits immediately assumed that Bill Clinton would “have to” resign. And I think that was a real possibility. But he didn’t. So even though people weren’t thrilled with this aspect of his conduct, it quickly shifted from a public debate about his conduct to a public debate about the desirability of booting a popular, effective president from office and he won. I can see why Spitzer may have decided he didn’t want to fight the fight; but that’s ultimately what he did. A politician who’s well-liked by his constituents pre-scandal, hit by a scandal that has no real bearing on his job performance, can usually hang on if he wants to.
And by the same token, I don’t think there would be any real barrier to Spitzer coming back in some form. I’ve heard some people say that they never liked Spitzer’s Wall Street work and therefore they’re glad he’s not around anymore. And I’ve heard more people say that they did like Spitzer’s Wall Street work and therefore it’s too bad that he’s not around. But the concern about the sex scandal is almost entirely a “meta” thing, people think it’s too bad that other people see Spitzer as too tainted.
- Aravosis: Top GOP aide: We don't want to fix AIG bonus problem, because then we can't use it to hurt Democrats any more From Greg Sargent:
A GOP leadership aide explained this to me in candid terms. The explanation becomes even more relevant in light of the news breaking just now that Tim Geithner acknowledged that Treasury pushed for the loophole to be inserted in the stim package.
Ah yes, they didn't want to fix the problem, and get us our money back, because then the Democrats would "evade" responsibility for George Bush having given AIG the money in the first place last September.
The leadership aide said that House GOPers who voted for today’s tax measure did so because they’d calculated that they couldn’t explain a No vote to voters in their districts, particularly after the expressions of outrage from Republicans about the AIG fiasco. But those who voted No, the aide said, calculated that they could explain to their constituents that they didn’t want Democrats to be able to evade responsibility for their role in creating the mess.
Krugman: The Great Recession versus the Great Depression
Reading this article about the global manufacturing plunge, I wondered: how does the current slump stack up against the early stages of the Great Depression? The US has consistent industrial production data back to 1919, so it’s a fairly straightforward exercise. Below is the change in industrial production, measured in logs, from the previous peak in 1929-30 and 2007-9.
At first, the current recession didn’t hit industrial production all that hard. But the pace accelerated dramatically last fall, so that at this point we’re sort of experiencing half a Great Depression. That’s pretty bad.
GOP defends AIG? March 19: Republicans seem to be on AIG's side in the bonus battle. Many of them rallied against legislation aimed at recouping the bonuses. What is going on with this bill? Rachel Maddow is joined by The Plum Line blog's Greg Sargent.
Visit msnbc.com for Breaking News, World News, and News about the Economy
Daily Kos' DemfromCT provides the Weekly Tracking Poll: GOP Favorability Has A Case Of The Dwindles
Research 2000 for Daily Kos. 3/16-19. All adults. MoE 2% (3/8-12 results):
FAVORABLE UNFAVORABLE NET CHANGE PRESIDENT OBAMA 67 (68) 28 (27) -2 PELOSI: 39 (38) 41 (42) 2 REID: 34 (33) 47 (46) +0 McCONNELL: 19 (20) 54 (53) -2 BOEHNER: 13 (14) 57 (55) -3 CONGRESSIONAL DEMS: 44 (43) 48 (49) +2 CONGRESSIONAL GOPS: 17 (16) 72 (71) +0 DEMOCRATIC PARTY: 53 (55) 39 (38) -3 REPUBLICAN PARTY: 27 (29) 65 (66) -1 Full crosstabs here. This poll is updated every Friday morning, and you can see trendline graphs here.
Let's start with the graphs from Congressional Parties and national parties:
From 1/22, when everyone's spirits were highest, Congressional Republicans' favorability have dropped from 26 then to 17 now. The national party has dropped from 34 to 27, same time frame.
The Congressional Democrats saw a whopping 13-point net gain in their favorability ratings on Feb 26, and haven't looked back. That week (Obama's address to the nation — with Bobby Jindal's response — was Feb 24), the gain came mostly among Democratic respondents, who went from 68-31 favorable/unfavorable to 71-18, and Independents, who went from 38-55 to 47-44.
Hey, what about Congressional leadership? Oh, my.
I keep thinking John Boehner can't get any lower, but he keeps fooling me. He gets 37/25 (fav/unfav) from Republicans this week, and a 9/62 (fav/unfav) from Independents.
Meanwhile, Obama's slight drop from peak (now at 67/28) is made up of favorables that break out this way: 89/9 D, 73/23 I, 23/68 R. This Obama net favorability (fav minus unfav) by party shows that it's unhappy R's that drive the numbers down. Watch those independents.
And keep these fav/unfav/no opinion numbers in mind:
NORTHEAST 86 11 3
SOUTH 42 50 8
MIDWEST 73 23 4
WEST 75 20 5The South is different than the rest of us [at least as far as polling patterns].
Benen TAPPER, TWITTER, AND ONLINE ETIQUETTE....
It was bound to be of interest to the political world anyway, but ABC News' Jake Tapper helped get the ball rolling on the Special Olympics/Obama story last night. He was first out of the gate with a news item and a report on the president's comment on his Twitter feed.Not surprisingly, this generated the inevitable Drudge link. Tapper kept the discussion going with additional thoughts on potential Democratic hypocrisy (what if Bush had said the same thing) and potential Republican hypocrisy (conservatives usually hate political correctness).
My friend Adam Serwer noted some hypocrisy of his own:
Funny, I was thinking the same thing about press who moments ago believed the president had "too much on his plate" now deciding that the country should spend a whole day talking about an offensive joke.
In any case, you should know that Tapper's really disappointed about his 9 PM blog post getting picked up by Drudge, possibly driving the day and leading to all this "hypocrisy" when we have two wars and an economic crisis to deal with. That's the last thing Tapper wanted when he hyped this "breaking" news last night.
Soon after, Tapper blocked Adam from following his Twitter feed.
And around the same time, TPM was tweaking Tapper over his Twitter observations. So, Tapper blocked TPM from following his Twitter feed, too.
Now, I'm not going to pretend to be an expert on Twitter etiquette; I'm not even on Twitter. But blocking those who offer mild criticism seems kind of petty. When it comes from a journalist who frequently addresses the importance of transparency, it's especially bad form.
From the comments:
On a related note, Tapper's comment section is heavily moderated. They delete a lot of polite, critical comments. Or at least that's been my experience.
Posted by: Crust on March 20, 2009 at 12:51 PM | PERMALINKCrust, that has been my experience, as well. I posted a rebuttal to Tapper once, which included quotes and such (no links in case they didn't allow that) and it, along with other comments, never got posted. Just disappeared into cyber oblivion.
Posted by: MsJoanne on March 20, 2009 at 12:54 PM | PERMALINK
Really Faint Praise from Yglesias: Pollitt On Douthat
For a column that’s critical of me, I don’t really disagree with much of what Katha Pollitt has to say about Ross Douthat. He’s a conservative. I am not a conservative. If I thought that conservative views were correct, I would be a conservative. But I think they’re wrong. Therefore, I think that conservatives such as Ross Douthat are regularly wrong about a wide variety of important topics. Thus, instances of them being wrong can be easily produced. I also am not a fan of the idea that institutions are under an obligation to be ideologically balanced. Conservative editorial pages normally contain zero progressive contributors, and there’s no particular reason that The New York Times op-ed page needs to have two conservatives.
That said, The New York Times clearly made the decision that it does want two writers from the right on its pages. Given that, I think Ross Douthat is one of the best possible candidates and certainly will be a marked improvement over Bill Kristol. I don’t think it makes sense to reason “all conservatives are wrong about important things, therefore all conservatives are equally pernicious.” Tyler Cowen on economics has a lot more to offer than Larry Kudlow on economics, even though I agree with neither of them. I think that’s common sense, and I don’t think it makes one a traitor to progressive politics to point this kind of thing out or to think it’s a good thing when conservatives-who-offer-more replace conservatives-who-offer-less.
Rise of the conservadems March 19: A caucus of moderate Democrats was officially announced this week, which includes eight Senators. Will this new moderate caucus oppose White House policies? Rachel Maddow is joined by a moderate Democrat caucus member Sen. Mark Begich, D-AK.
Visit msnbc.com for Breaking News, World News, and News about the Economy
The format works for me. You quote enough to let me decide if I want to follow the link and read the whole thing, and the links are really easy to find.
ReplyDeleteOn Krugman's quote, the one that Atrios pointed out, I've been trying to maintain a fatalistic attitude about Obama. Back when he capitulated on FISA I realized that this wasn't going to be an easy ride down Progressive Street.
Ever since then I've been telling myself, "if he doesn't fix things, then they're going to break." And now he's not fixing them, and now they're breaking.
It gives me a kind of "I told you so" comfort.
Cliff, thanks for the feedback. As for Obama, he is fixing plenty (has a lot to fix), but a few high profile issues (such as the "too big" banks) are incredibly difficult.
ReplyDelete