Was Hurricane Sandy a Democrat? Two weeks ago, Mitt Romney’s tormentor was a debate moderator named Candy. This week, Romney’s nemesis is a storm named Sandy. The latest blow to the Republican’s Presidential campaign came from an actual wind. Precious news program time, normally devoted to the battle for the White House – which amounts to free infomercial time from the networks – is now being diverted to coverage of the storm’s havoc. Worse yet, the Benghazi story has become “old news”, bumped back to oblivion. As Romney’s surrogates complain that Obama cannot be trusted to work with Republicans, news coverage shows the President with Republican Chris Christie at his side so frequently that rest-home-bound geriatrics are remarking about the excessive weight gained by Joe Biden. Despite the claim that government is the problem rather than the solution, many of Sandy’s victims are finding the opposite to be the case. FEMA can no longer be described as a government extravagance. If all that weren’t bad enough – global warming is back in the news . . . big time . . .
What could likely be a lasting legacy from Sandy will have a bipartisan impact – a painful blow to Democrats and Republicans who remain dogmatically opposed to government-initiated fiscal stimulus programs. Sandy is about to prove them wrong. The massive infrastructure restoration efforts, which will be necessary to address Sandy’s damage, could end up providing the financial stimulus which Congress would never have approved if Sandy had not headed westbound.
Duncan Bowen Black has a PhD in Economics from Brown University. His Eschaton blog presents the liberal perspective on more issues than those related to the economy. Love him or hate him, his April 30 USA Today article is downright prescient. Sandy will prove, once and for all, that Keynes was right. Resistance is futile. Consider his points:
To suggest that the response to the storm impact might improve the economy is not to suggest that the storm is somehow a good thing, but a quick mobilization of resources to complete necessary repairs could temporarily boost employment and improve business for companies producing and selling construction materials. There would also be additional multiplier effects of this spending on the economy, as workers and business owners spend their increased wages and profits.
But this could be true even absent widespread storm damage. Speeding up other infrastructure repair projects would also put people back to work. For example, many cities have aging water systems that experience regular costly water main breaks. These projects don’t need costly studies or lengthy environmental impact reports and could be implemented almost immediately. Buy materials, dig up the streets, replace the pipes, repair the streets and pay your workers. They are truly shovel ready projects in need of funding.
No degree of Austerian opposition will be able to prevent the post-Sandy infrastructure restoration programs from being implemented. Sandy is about to teach America an important lesson, which could motivate many politicians to repeat what Richard Nixon said in 1971: “I am now a Keynesian in economics”.
Comments Off on Real-Time Fact Checking for Political Debates
Note: This posting was published before the second 2012 Presidential debate at HoftsraUniversity.
After the Vice-Presidential debate, many of Team Obama’s surrogates were referring to both Paul Ryan and Mitt Romney as liars. Obviously, most Republicans were upset by this. What I found amusing about the entire dust-up was that at no time did anyone from Team Obama support their aspersions with a reference to a fact-checking website. It would have been easy enough. Directing people to a fact-checking website would have been even more helpful because the site would inform the reader that the candidate in question told a number of lies. Upon visiting one of the fact-checking websites, Team Obama’s aversion to using such a site to support those nasty allegations becomes obvious: there are a number of untrue statements from Obama and Biden which are also exposed.
The PolitiFact page concerning the Denver Obama – Romney debate can be found here. The FactCheck analysis of that first Obama – Romney debate can be found here.
As for the Vice-Presidential debate, the PolitiFact page is here and the FactCheck Veep debate page is here.
After learning the truth about what was said during the debates, I immediately imagined a political debate in which three meters – similar to PolitiFact’s Truth-O-Meter – appear at the bottom of the screen. The meters would provide readings from three independent fact-checking services. When a candidate would finish making a factual assertion, the meters would indicate the degree of veracity for that statement. Upon further consideration, it quickly became obvious that a delay of as much as twenty minutes might be necessary between the time of the statement and the broadcast. If seven-second delays are used to censor obscene words, why not use a twenty-minute delay to expose lies? If a twenty-second delay was used to avoid broadcast of a grizzly mishap during Felix Baumgartner’s supersonic skydive, why not use a twenty-minute delay to open a window to the truth? If the networks can provide audience response meters to the candidates’ statements, they should be able to provide fact-checking readouts in real time. It might be necessary to delay the broadcast version of the debate as much as twenty minutes later than “live”, and it could get bogged down by delays between questions so that the meter reading from one candidate’s previous statement would not remain on the screen while the opposing candidate would begin speaking in response to the next question. Nevertheless, it would be more interesting and the candidates would have no reason to resort to calling each other liars.
If such a debate format were actually suggested, it would be amusing to watch the responses to the proposal. I would be willing to bet that all candidates and political parties would oppose it. Lies are politicians’ tools. Exposing candidates’ lies during a political debate would be compared to requiring a magician to expose the secrets behind each trick during the course of a performance.
It is up to the voters to insist that political campaigns are not magic. Some politicians may have a supernatural ability for making enormous amounts of money appear in their campaign accounts, but the truth of what these candidates say should not be shrouded in mystery. Beyond that, viewers should not be required to take notes and then look up each fact on a website to determine whether a politician is lying. The use of three different, independent fact-checking services would provide a more objective measure of truth-telling.
Here’s hoping that the 2016 election campaign will involve the use of real-time fact checking during the debates. We might find ourselves watching candidates who have more integrity than the characters we have been watching during the current campaign cycle.
By now, you’ve heard about it dozens of times. Mitt Romney is taking heat for remarks he made at a private fundraiser in Boca about the 47 percent of Americans who won’t vote for him because they enjoy taking handouts from the government. In response to the dustup, the Romney camp has focused on remarks made by Barack Obama during the 2008 campaign about people who “cling to their guns and religion”. Obama’s discussion with “Joe the Plumber” about “spreading the wealth around” has been cited as another example of Obama’s favoritism of one population segment over another. Nevertheless, as Brit Hume explained to Greta on Fox News, the Republicans’ focus on those remarks did not work during the 2008 campaign and there is no reason to believe that it will gain any more traction during the current election cycle.
Actually, there is a better example of Obama’s expression of contempt for a bloc of voters during a fundraiser, which is somewhat analogous the situation involving Romney in Boca. During the mid-term election campaign in September of 2010, Obama managed to alienate a good number of his own supporters during an event at the home of the appropriately-named Rich Richman. The event demonstrated how politicians – from either party – will speak more candidly and cynically about the “little people” when talking to their fat cat contributors. Nevertheless, the Republicans will not likely exploit Obama’s remarks at the Rich-man event. Of course, Obama supporters would be reminded that their candidate is not a significantly different alternative to Romney. However, by the same token, Romney supporters would be reminded that their candidate does not offer a significantly distinct alternative to Obama. As a result, the Republicans will never use it.
Let’s jump into the time machine and look back at how I discussed the Richman event on September 20, 2010:
President Obama recently spoke at a $30,000-per-plate fundraising event for the Democratic National Committee at the home of Richard and Ellen Richman. (Think about that name for a second: Rich Richman.) Mr. Richman lives up to his surname and resides in the impressive Conyers Farm development in Greenwich, Connecticut. Christopher Keating of the Capitolwatch blog at courant.com provided us with the President’s remarks, addressed to the well-heeled attendees:
. . . Democrats, just congenitally, tend to get – to see the glass as half empty. (Laughter.) If we get an historic health care bill passed – oh, well, the public option wasn’t there. If you get the financial reform bill passed – then, well, I don’t know about this particularly derivatives rule, I’m not sure that I’m satisfied with that. And gosh, we haven’t yet brought about world peace and – (laughter.) I thought that was going to happen quicker. (Laughter.) You know who you are. (Laughter.)
The tactlessness of those remarks was not lost on Glenn Greenwald of Salon.com. Mr. Greenwald transcended the perspective of an offended liberal to question what could possibly have been going on in the mind of the speaker:
What’s most striking about Obama’s comments is that there is no acceptance whatsoever of responsibility (I’ve failed in some critical areas; we could have/should have done better). There’s not even any base-motivating vow to fight to fix these particular failures (we’ll keep fighting for a public option/to curb executive power abuses/to reduce lobbyist and corporate control of our political process). Instead, he wants you to know that if you criticize him — or even question what he’s done (“well, I don’t know about this particular derivatives rule, I’m not sure that I’m satisfied with that”) – it’s your fault: for being some sort of naive, fringe-leftist idiot who thought he would eliminate the Pentagon and bring about world peace in 18 months, and/or because you simply don’t sufficiently appreciate everything he’s done for you because you’re congenitally dissatisfied.
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Sitting at a $30,000 per plate fundraising dinner and mocking liberal critics as irrational ingrates while wealthy Party donors laugh probably does wonders for bruised presidential egos, but it doesn’t seem to be a particularly effective way to motivate those who are so unmotivated. Then again, Barack Obama isn’t actually up for election in November, so perhaps the former goal is more important to him than the latter. It certainly seems that way from these comments.
Of course, liberals weren’t the only Obama supporters who felt betrayed by the President’s abandonment of his campaign promises. In fact, Obama owed his 2008 victory to those independent voters who drank the “Hope and Change” Kool-Aid.
Glenn Greenwald devoted some space from his Salon piece to illustrate how President Obama seems to be continuing the agenda of President Bush. I was reminded of the quote from former Attorney General John Ashcroft in an article written by Jane Mayer for The New Yorker. When discussing how he expected the Obama Presidency would differ from the Presidency of his former boss, George W. Bush, Ashcroft said:
“How will he be different? The main difference is going to be that he spells his name ‘O-b-a-m-a,’ not ‘B-u-s-h.’ ”
One important difference that Ashcroft failed to anticipate was that Bush knew better than to disparage his own base.
By the onset of the 2012 Presidential Campaign, many of Obama’s 2008 supporters had become ambivalent about their former hero. As I pointed out on August 13, once Romney had named Paul “Marathon Man” Ryan as his running mate (rather than Ohio Senator Rob Portman), he provided Democrats with a bogeyman to portray a Romney Presidency as a threat to middle-class Americans:
As the Democratic Party struggled to resurrect a fraction of the voter enthusiasm seen during the 2008 campaign, Mitt Romney came along and gave the Democrats exactly what they needed: a bogeyman from the far-right wing of the Republican Party. The 2012 campaign suddenly changed from a battle against an outsourcing, horse ballet elitist to a battle against a blue-eyed devil who wants to take away Medicare. The Republican team of White and Whiter had suddenly solved the problem of Democratic voter apathy.
Nevertheless, some degree of disillusionment experienced by Obama’s supporters continues. Consider the final paragraph from a September 20 essay by Robert Reich:
And even if Obama is reelected, more hard work begins after Inauguration Day – when we must push him to be tougher on the Republicans than he was in his first term, and do what the nation needs.
In other words, it will be up to the voters to make sure they aren’t betrayed by Obama as they were during his first term.
Quantitative easing is back. For those of you who still aren’t familiar with what quantitative easing is, I have provided a link to this short, funny cartoon, which explains everything.
The first two phases of quantitative easing brought enormous gains to the stock market. In fact, that was probably all they accomplished. Nevertheless, if there had been no QE or QE 2, most people’s 401(k) plans would be worth only a fraction of what they are worth today. The idea was that the “wealth effect” provided by an inflated stock market would both enable and encourage people to buy houses, new cars and other “big ticket” items – thus bringing demand back to the economy. Since the American economy is 70 percent consumer-driven, demand is the engine that creates new jobs.
It took a while for most of us to understand quantitative easing’s impact on the stock market. After the Fed began its program to buy $600 billion in mortgage-backed securities in November of 2008, some suspicious trading patterns began to emerge. I voiced my own “conspiracy theory” back on December 18, 2008:
I have a pet theory concerning the almost-daily spate of “late-day rallies” in the equities markets. I’ve discussed it with some knowledgeable investors. I suspect that some of the bailout money squandered by Treasury Secretary Paulson has found its way into the hands of some miscreants who are using this money to manipulate the stock markets. I have a hunch that their plan is to run up stock prices at the end of the day before those numbers have a chance to settle back down to the level where the market would normally have them. The inflated “closing price” for the day is then perceived as the market value of the stock. This plan would be an effort to con investors into believing that the market has pulled out of its slump. Eventually the victims would find themselves hosed once again at the next “market correction”.
Felix Salmon eventually provided this critique of the obsession with closing levels and – beyond that – the performance of a stock on one particular day:
Or, most invidiously, the idea that the most interesting and important time period when looking at the stock market is one day. The single most reported statistic with regard to the stock market is where it closed, today, compared to where it closed yesterday. It’s an utterly random and pointless number, but because the media treats it with such reverence, the public inevitably gets the impression that it matters.
In March of 2009, those suspicious “late day rallies” returned and by August of that year, the process was explained as the “POMO effect” in a paper by Precision Capital Management entitled, “A Grand Unified Theory of Market Manipulation”.
By the time QE 2 actually started on November 12, 2010 – most investors were familiar with how the game would be played: The New York Fed would conduct POMO auctions, wherein it would purchase Treasury securities – worth billions of dollars – on an almost-daily basis. After the auctions, the Primary Dealers would take the sales proceeds to their proprietary trading desks, where the funds would be leveraged and used to purchase stocks. Thanks to QE 2, the stock market enjoyed another nice run.
This time around, QE 3 will involve the purchase of mortgage-backed securities, as did QE 1. Unfortunately, the New York Fed’s new POMO schedule is not nearly as informative as it was during QE1 and QE 2, when we were provided with a list of the dates and times when the POMO auctions would take place. Back then, the FRBNY made it relatively easy to anticipate when you might see some of those good-old, late-day rallies. The new POMO schedule simply informs us that “(t)he Desk plans to purchase $23 billion in additional agency MBS through the end of September.” We are also advised that with respect to the September 14 – October 11 time frame, “(t)he Desk plans to purchase approximately $37 billion in its reinvestment purchase operations over the noted monthly period.”
It is pretty obvious that the New York Fed does not want the “little people” partaking in the windfalls enjoyed by the prop traders for the Primary Dealers as was the case during QE 1 and QE 2. This probably explains the choice of language used at the top of the website’s POMO schedule page:
In order to ensure the transparency of its agency mortgage-backed securities (MBS) transactions, the Open Market Trading Desk (the Desk) at the New York Fed will publish historical operational results, including information on the transaction prices in individual operations, at the end of each monthly period shown in the table below.
In other words, the New York Fed’s idea of transparency does not involve disclosure of the scheduling of its agency MBS transactions before they occur. That information is none of your damned business!
We have never experienced a Presidential campaign with more fact-checking than what we are seeing during the current cycle. The well-timed release of a popular new book by Janine Driver entitled, You Can’t Lie to Me might be one of the reasons why this is happening. Fact-checking websites such as PolitiFact and FactCheck have been overflowing with reports of exaggerations, half-truths and flat-out lies by the candidates and their surrogates.
PolitiFact’s roots at the Tampa Bay Times made it particularly well-situated to expose the false claims made during speeches at the Republican Convention. One good example was the “Pants on Fire” rating given to a remark by South Dakota Senator John Thune, who claimed that the Obama administration proposed banning farm kids from doing basic chores.
Paul Ryan’s acceptance speech drew instant criticism from a number of news outlets. I quickly felt vindicated for my last posting, which asserted that Romney made a mistake by selecting Ryan, rather than Ohio Senator Rob Portman, as his running mate. FactCheck provided this breakdown of the misrepresentations in Ryan’s speech:
Paul Ryan’s acceptance speech at the Republican convention contained several false claims and misleading statements. Delegates cheered as the vice presidential nominee:
Accused President Obama’s health care law of funneling money away from Medicare “at the expense of the elderly.” In fact, Medicare’s chief actuary says the law “substantially improves” the system’s finances, and Ryan himself has embraced the same savings.
Accused Obama of doing “exactly nothing” about recommendations of a bipartisan deficit commission — which Ryan himself helped scuttle.
Claimed the American people were “cut out” of stimulus spending. Actually, more than a quarter of all stimulus dollars went for tax relief for workers.
Faulted Obama for failing to deliver a 2008 campaign promise to keep a Wisconsin plant open. It closed less than a month before Obama took office.
Blamed Obama for the loss of a AAA credit rating for the U.S. Actually, Standard & Poor’s blamed the downgrade on the uncompromising stands of both Republicans and Democrats.
If the widespread criticism of the veracity of Ryan’s speech had not been bad enough, Runner’s World saw fit to bust Ryan for making a false claim that he once ran a marathon in less than three hours. In reality, it took him just over four hours.
At the conclusion of FoxNewsapalooza, the Media Matters website posted an analysis of how Mitt Romney’s acceptance speech was a smorgasbord of falsehoods concocted by bloviators from the right-wing media.
Ultimately, convention speeches are about making the argument for your team. We should fully expect politicians to make their case using facts and figures that either tilt positive about their accomplishment – or negative about their opponents. As the fact-checking business has blossomed in the news media, it has been increasingly hard for politicians to get away with such truth-shading without someone noticing.
Both political parties will stretch the truth if they believe it will advance their political interests. It’s been a rough campaign so far, but the GOP convention that just ended was strictly in the mainstream for such party celebrations.
As the Democratic Convention approaches, a good deal of attention has been focused on PolitiFact’s Obameter, which measures how well Obama has delivered on his campaign promises. PolitiFact’s most recent status report offered this analysis:
Our scorecard shows Obama kept 37 percent of his promises. He brought the war in Iraq to a close and finally achieved the Democratic dream of a universal health care program. When the United States had Osama bin Laden in its sights, Obama issued the order to kill.
Sixteen percent are rated Broken, often because they hit a brick wall in Congress. Global warming legislation passed the House but died in the Senate. He didn’t even push for comprehensive immigration reform. His program to help homeowners facing foreclosure didn’t even meet its own benchmarks. (PolitiFact rates campaign promises based on outcomes, not intentions.)
With four months left in Obama’s term, PolitiFact has rated Obama’s remaining promises Compromise (14 percent), Stalled (10 percent) or In the Works (22 percent).
One of the Obama campaign’s negative ads concerning Romney’s economic record as Governor of Massachusetts drew some criticism from FactCheck:
The ad claims that Romney raised taxes on the middle class. It’s true that Romney imposed a number of fees, but none of them targeted middle-income persons. Also, Romney proposed cutting the state income tax three times – a measure that would have resulted in tax cuts for all taxpayers – but he was rebuffed every time by the state’s Democratic Legislature.
I suspect that the Obama campaign has a secret plan in the works to avoid the scrutiny of fact-checkers during their convention. Their plan to have John Kerry speak is actually part of a plot to cause the fact-checkers to fall asleep. Once “Operation Snoozeboat” is complete, the speakers who follow Kerry will be able to make the wildest claims imaginable – and get away with it!
Comments Off on Wisconsin Bogeyman Will Help Obama
Mitt Romney’s choice of Paul Ryan as his running mate will do more so solve President Obama’s voter apathy problem than it will do to boost the enthusiasm of Republican voters. While the Tea Party branch of the Republican Party complains that “Massachusetts moderate” Romney is not a significant alternative to Barack Obama, the Democratic Party’s base complains the bank-centric Obama administration is indistinguishable from a Romney administration. Criticism of the Obama administration’s domestic surveillance program comes from across the political spectrum. One need look no further than the Business Insiderto find disappointment resulting from the Obama administration’s efforts to turn America into a police state.
As the Democratic Party struggled to resurrect a fraction of the voter enthusiasm seen during the 2008 campaign, Mitt Romney came along and gave the Democrats exactly what they needed: a bogeyman from the far-right wing of the Republican Party. The 2012 campaign suddenly changed from a battle against an outsourcing, horse ballet elitist to a battle against a blue-eyed devil who wants to take away Medicare. The Republican team of White and Whiter had suddenly solved the problem of Democratic voter apathy.
I recently expressed the opinion that the only logical candidate for Romney to select as his running mate would have been Ohio Senator Rob Portman. In the wake of Romney’s selection of Paul Ryan, a number of commentators have emphasized that Portman would have been a smarter choice. Polling wiz Nate Silver recently voiced a similar opinion:
Politics 101 suggests that you play toward the center of the electorate. Although this rule has more frequently been violated when it comes to vice-presidential picks, there is evidence that presidential candidates who have more “extreme” ideologies (closer to the left wing or the right wing than the electoral center) underperform relative to the economic fundamentals.
Various statistical measures of Mr. Ryan peg him as being quite conservative. Based on his Congressional voting record, for instance, the statistical system DW-Nominate evaluates him as being roughly as conservative as Representative Michele Bachmann of Minnesota.
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Because of these factors, a recent analysis I performed placed Mr. Ryan 10th from among 14 potential vice-presidential picks in terms of his immediate impact on the Electoral College. If Mr. Romney wanted to make the best pick by this criterion, he would have been better off to choose an alternative like Senator Rob Portman of Ohio, or Gov. Bob McDonnell of Virginia.
Nate Silver was not alone with his premise that Romney’s choice of Ryan was made out of desperation. At the Right Condition blog, Arkady Kamenetsky not only emphasized that the Ryan candidacy will help galvanize Obama’s liberal base – he went a step further to demonstrate that the Ryan budget is a “smoke and mirrors” pretext for preserving the status quo. After highlighting Ryan’s support of TARP, Medicare Part D and No Child Left Behind, Arkady Kamenetsky performed a detailed comparison of the Ryan budget with the Obama budget to demonstrate a relatively insignificant difference between the two. Kamenetsky concluded the piece with these observations:
So this of course begs the question, why did Romney do this? Why select a VP that will provide such easy ammunition for the Left with virtually no reward? The answer is quite simple. Romney and Ryan represent exactly the same problem even if one appears to be a moderate and the other appears to be an epic fiscal warrior. The Republican party fights for and pushes through the status-quo. The images you see up above and the Ryan record is the status-quo. No doubt about it.
Yet Romney is counting on the ignorance of Republican base to run with the facade of Ryan’s conservatism. If that illusion holds then Ryan’s image will invariably boost Romney’s own image as many will view Romney’s decision as courageous and bold despite Obama’s willingness to distort Ryan’s budget. In other words, you are witnessing a most fantastic and glamorous circus. A bad Hollywood movie, except that ending will be quite real and not something you can pause or turn off.
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Romney and Ryan will lose in November and the image of the heartless Conservative killing granny will resonate with America, the tragedy of course is that neither Ryan or Romney are willing to actually cut anything! The tragedy will become even more amusing as we will witness a nasty and partisan fight further dividing Americans as they fight and defend differing policies with the exact same results.
During the coming weeks, watch for efforts by the mainstream news media to portray this election as a close contest – in their own desperate attempts to retain an audience for what will probably turn out to be the least exciting Presidential campaign since Reagan vs. Carter.
Much has been written about “Turbo” Tim Geithner since he first became Treasury Secretary on January 26, 2009. In his book, Too Big to Fail, Andrew Ross Sorkin wrote adoringly about Geithner’s athletic expertise. On the other hand, typing “Turbo Tim Geithner” into the space on the upper-right corner of this page and clicking on the little magnifying glass will lead you to no less than 61 essays wherein I saw fit to criticize the Treasury Secretary. I first coined the “Turbo” nickname on February 9, 2009 and on February 16 of that year I began linking “Turbo” to an explanatory article, for those who did not understand the reference.
Geithner has never lacked defenders. The March 10, 2010 issue of The New Yorker ran an article by John Cassidy entitled, “No Credit”. The title was meant to imply that Getithner’s efforts to save America’s financial system were working, although he was not getting any credit for this achievement. From the very outset, the New Yorker piece was obviously an attempt to reconstruct Geithner’s controversial public image – because he had been widely criticized as a tool of Wall Street.
Edward Harrison of Credit Writedowns dismissed the New Yorker article as “an out and out puff piece” that Geithner himself could have written:
Don’t be fooled; this is a clear plant to help bolster public opinion for a bailout and transfer of wealth, which was both unnecessary and politically damaging.
Another article on Geithner, appearing in the April 2010 issue of The Atlantic, was described by Edward Harrison as “fairly even-handed” although worthy of extensive criticism. Nevertheless, after reading the following passage from the first page of the essay, I found it difficult to avoid using the terms “fawning and sycophantic” to describe it:
In the course of many interviews about Geithner, two qualities came up again and again. The first was his extraordinary quickness of mind and talent for elucidating whatever issue was the preoccupying concern of the moment. Second was his athleticism. Unprompted by me, friends and colleagues extolled his skill and grace at windsurfing, tennis, basketball, running, snowboarding, and softball (specifying his prowess at shortstop and in center field, as well as at the plate). He inspires an adolescent awe in male colleagues.
Gawd! Yeech!
In November of 2008, President George W. Bush appointed Neil M. Barofsky to the newly-established position, Special Inspector General for the Troubled Asset Relief Program (SIGTARP). Barofsky was responsible for preventing fraud, waste and abuse involving TARP operations and funds. From his first days on that job, Neil Barofsky found Timothy Geithner to be his main opponent. On March 31 of 2009, the Senate Finance Committee held a hearing on the oversight of TARP. The hearing included testimony by Neil Barofsky, who explained how the Treasury Department had been interfering with his efforts to ascertain what was being done with TARP funds which had been distributed to the banks. Matthew Jaffe of ABC News described Barofsky’s frustration in attempting to get past the Treasury Department’s roadblocks.
On the eve of his retirement from the position of Special Inspector General for TARP (SIGTARP), Neil Barofsky wrote an op-ed piece for the March 30, 2011 edition of The New York Times entitled, “Where the Bailout Went Wrong”. Barofsky devoted a good portion of the essay to a discussion of the Obama administration’s failure to make good on its promises of “financial reform”, with a particular focus on the Treasury Department:
Worse, Treasury apparently has chosen to ignore rather than support real efforts at reform, such as those advocated by Sheila Bair, the chairwoman of the Federal Deposit Insurance Corporation, to simplify or shrink the most complex financial institutions.
In the final analysis, it has been Treasury’s broken promises that have turned TARP — which was instrumental in saving the financial system at a relatively modest cost to taxpayers — into a program commonly viewed as little more than a giveaway to Wall Street executives.
It wasn’t meant to be that. Indeed, Treasury’s mismanagement of TARP and its disregard for TARP’s Main Street goals — whether born of incompetence, timidity in the face of a crisis or a mindset too closely aligned with the banks it was supposed to rein in — may have so damaged the credibility of the government as a whole that future policy makers may be politically unable to take the necessary steps to save the system the next time a crisis arises. This avoidable political reality might just be TARP’s most lasting, and unfortunate, legacy.
It should come as no surprise that in Neil Barofsky’s new book, Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street, the author pulls no punches in his criticism of Timothy Geithner. Barofsky has been feeding us some morsels of what to expect from the book by way of some recent articles in Bloomberg News. Here is some of what Barofsky wrote for Bloombergon July 22:
More important, the financial markets continue to bet that the government will once again come to the big banks’ rescue. Creditors still give the largest banks more favorable terms than their smaller counterparts — a direct subsidy to those that are already deemed too big to fail, and an incentive for others to try to join the club. Similarly, the major banks are given better credit ratings based on the assumption that they will be bailed out.
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The missteps by Treasury have produced a valuable byproduct: the widespread anger that may contain the only hope for meaningful reform. Americans should lose faith in their government. They should deplore the captured politicians and regulators who distributed tax dollars to the banks without insisting that they be accountable. The American people should be revolted by a financial system that rewards failure and protects those who drove it to the point of collapse and will undoubtedly do so again.
Only with this appropriate and justified rage can we hope for the type of reform that will one day break our system free from the corrupting grasp of the megabanks.
Barofsky may have an axe to grind, but he grinds it well, portraying Geithner as a dissembling bureaucrat in thrall to the banks and reminding us all that President Barack Obama’s selection of Geithner as his top economic official may have been one of his biggest mistakes, and a major reason the White House incumbent has to fight so hard for re-election.
From his willingness to bail out the banks with virtually no accountability, to his failure to make holders of credit default swaps on AIG take a haircut, to his inability to mount any effective program for mortgage relief, Geithner systematically favored Wall Street over Main Street and created much of the public’s malaise in the aftermath of the crisis.
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Barofsky, a former prosecutor, relates that he rooted for Geithner to get the Treasury appointment and was initially willing to give him the benefit of the doubt when it emerged that he had misreported his taxes while he worked at the International Monetary Fund.
But as more details on those unpaid taxes came out and Geithner’s explanations seemed increasingly disingenuous, Barofsky had his first doubts about the secretary-designate.
Barofsky, of course, was not alone in his skepticism, and Geithner’s credibility was damaged from the very beginning by the disclosures about his unpaid taxes.
* * *
Barofsky concludes his scathing condemnation of Geithner’s “bank-centric policies” by finding some silver lining in the cloud – that the very scale of the government’s failure will make people angry enough to demand reform.
Once Geithner steps down from his position at the end of the year, we may find that his legacy is defined by Neil Barofsky’s book, rather than any claimed rescue of the financial system.
Another goofball televangelist just proved how he and his ilk would prefer America to be more like Iran.
Immediately after the Colorado movie theater shootings, I was ready to post my thoughts about the sleazy ways in which the mainstream news media exploit such events. After considering the darkly sarcastic things I had to say, I decided that such a posting would be inappropriate – because it was too soon after the tragedy. I chose to heed the advice from that old song by The English Beat: Save It for Later. Too many people were hurting from this incident. A number of guys died because they threw themselves over their girlfriends in the ultimate act of love.
Nevertheless, those who would like to see the Iranization of America did not find it necessary to restrain themselves from expressing opinions which would inflame the open emotional wounds sustained by innocent people. The Iranizationists saw fit to remind everyone that this happened because God concluded that some Americans deserved this.
Many followers of these deranged televangelists get irate when commentators point out how such religious zealots want to make America into another Iran. The rebuff is always the same: “Iranians are Muslim and we are Christian!” Nevertheless, one need only look at what is being said to see that the Islamist message and the Wackovangelist messages are the same.
Immediately after the tragedy, televangelist Jerry Newcombe phoned into a program produced by the homo-hating, American Family Association. You can watch this clip of that event. Pay close attention to how the show’s host blinks incessantly throughout the call. I would love to get a psychiatrist’s opinion as to what – if anything – that might indicate. Anyway, Newcombe wanted to remind everyone that any individual killed in that theater who was not Christian would be going to hell. In other words: If your murdered friend or loved one was a Jew – that person would be going to hell.
Newcombe’s claim was the same spiteful remark we hear from Islamist terrorists after they kill Jews: Not only did all those people get killed – but they are also going to hell!
How thoughtful of Newcombe to remind the infidels’ next of kin that their loved ones are headed toward eternal damnation!
In Newcombe’s America, Jews go to hell when they die. How does that version of America differ from Iran?
With the Republican Convention set to begin on August 27, we are heading toward the final phase of the GOP Veepstakes. Currently, the mainstream media mania is focused on the belief that Romney will play the Rice Card. It won’t happen. The excitement concerns the possibility that playing the Rice Card will enhance support from African-American and female voters. Unfortunately, Condoleezza Rice lacks the degree of charisma one would expect in a Vice-Presidential candidate. Worse yet, the baggage she brings from her testimony before the 9/11 Commission, particularly in response to the questions posed by Richard Ben-Veniste concerning the August 6, 2001 Presidential Daily Briefing is the most important reason she will not be picked. Her failure to seriously heed the warning, “Bin Laden Determined to Attack Inside the United States” would become a big issue – once again. Her response to Ben-Veniste’s interrogation was asinine:
Commissioner, this was not a warning. This was a historic memo — historical memo prepared by the agency because the president was asking questions about what we knew about the inside.
We often hear pundits recite the Cardinal Rule for Presidential candidates, in selecting their Vice-Presidential nominee, as: “Do No Harm”. In other words: Don’t screw up your campaign by choosing a controversial running mate. If Romney were to play the Rice card, he would append to his own campaign the Bush administration’s failure to heed the warnings about the September 11 attacks. It won’t happen.
Wall Street Journal columnist Peggy Noonan – who considered the choice of Sarah Palin as “cynical” – recently endorsed Rice as the best candidate:
Consider: A public figure of obvious and nameable accomplishment whose attainments can’t be taken away from her. Washington experience – she wouldn’t be learning on the job. Never ran for office but no political novice. An academic, but not ethereal or abstract. A woman in a year when Republicans aren’t supposed to choose a woman because of what is now called the 2008 experience – so the choice would have a certain boldness. A black woman in a campaign that always threatens to take on a painful racial overlay. A foreign-policy professional acquainted with everyone who’s reigned or been rising the past 20 years.
What is really happening here is that potential candidates from minority groups are being paraded before the public, purely for optics. Last month, it was Marco Rubio and now it’s Condoleezza Rice. It has been important for the Romney camp to convince the voters that it seriously considered putting a minority group member on the ticket before finally deciding on a white man.
At this point, the smart money is on Ohio Senator Rob Portman. Portman is from a battleground state and Romney can be confident that Portman won’t make any stupid moves or inappropriate remarks which could damage the campaign. Romney needs to play it safe and Portman is a safe choice.
Actually, the Rice Card is being played right now. You won’t see it again after August.
The most recent “light at the end of the tunnel” for the European sovereign debt crisis was seen on Friday June 29. At a summit in Brussels, leaders of the European Union member nations agreed upon yet another “plan for a plan” to recapitalize failing banks – particularly in Spain. The Summit Statement, which briefly summarized the terms of the plan, explained that an agreement was reached to establish a supervisory entity which would oversee the European banking system and to allow recapitalization of troubled banks without adding to sovereign debt. By owning shares in the ailing banks, the European Stability Mechanism would no longer have a senior creditor status, in order to prevent investors from being scared away from buying sovereign bonds.
Global stock indices went parabolic after the news from Brussels on June 29. Nevertheless, many commentators expressed their skepticism about the latest plan. Economist John Hussman of the Hussman Funds discussed the shortcomings of the proposal in his Weekly Market Comment:
The upshot here is that Spain’s banks are undercapitalized and insolvent, but rather than take them over and appropriately restructure them in a way that requires bondholders to take losses instead of the public, Spain hopes to tap European bailout funds so that it can provide capital directly to its banks through the European Stability Mechanism (ESM), and put all of Europe’s citizens on the hook for the losses.Spainhas been trying to get bailout funds without actually having the government borrow the money, because adding new debt to its books would drive the country further toward sovereign default. Moreover, institutions like the ESM, the ECB, and the IMF generally enjoy senior status on their loans, so that citizens and taxpayers are protected. Spain’s existing bondholders have objected to this, since a bailout for the banks would make their Spanish debt subordinate to the ESM.
As a side note, the statement suggests that Ireland, which already bailed its banks out the old-fashioned way, will demand whatever deal Spain gets.
So the hope is that Europe will agree to establish a single bank supervisor for all of Europe’s banks. After that, the ESM – Europe’s bailout fund – would have the “possibility” to provide capital directly to banks. Of course, since we’re talking about capital – the first buffer against losses – the bailout funds could not simply be lent to the banks, since debt is not capital. Instead, it would have to be provided by directly purchasing stock (though one can imagine the Orwellian possibility of the ESM lending to bank A to buy shares of bank B, and lending to bank B to buy shares of bank A). On the question of whether this is a good idea, as opposed to the alternative of properly restructuring banks, ask Spain how the purchase of Bankia stock has been working out for Spanish citizens (Bankia’s bondholders should at least send a thank-you note). In any event, if this plan for a plan actually goes through, the bailout funds – provided largely by German citizens – would not only lose senior status to Spain’s government debt; the funds would be subordinate even to the unsecured debt held by the bondholders of Spanish banks, since equity is the first thing you wipe out when a bank is insolvent.
It will be interesting to see how long it takes for the German people to figure this out.
The criticism expressed by Charles Hugh Smith is particularly relevant because it addresses the latest move by the European Central Bank to lower its benchmark interest rate by 25 basis points (0.25%) to a record low of 0.75 percent. Smith’s essay, entitled “Sorry Bucko Europe Is Still in a Death Spiral” consisted of sixteen phases of the death spiral dynamic. Here are the final seven:
10. Transferring bad debt to central banks does not mean interest will not accrue: interest on the debt still must be paid out of future income, impairing that income.
11. Lowering interest rates does not create collateral where none exists.
12. Lowering interest rates only stretches out the death spiral, it does not halt or reverse it.
13. Centralizing banking and oversight does not create collateral where none exists.
14. Europe will remain in a financial death spiral until the bad debt is renounced/written off and assets are liquidated on the open market.
15. Anything other than this is theater. Pushing the endgame out a few months is not a solution, nor will it magically create collateral or generate sustainable “growth.”
16. The Martian Central Bank could sell bonds to replace bad debt in Europe, but as long as the MCB collects interest on the debt, then nothing has changed.
The Martians would be extremely bent when they discovered there is no real collateral for their 10 trillion-quatloo loan portfolio in Europe.
Of course, Mr. Smith is forgetting that the Martians could call upon those generous taxpayers from planet Zobion for a bailout . . .
TheCenterLane.com offers opinion, news and commentary on politics, the economy, finance and other random events that either find their way into the news or are ignored by the news reporting business. As the name suggests, our focus will be on what seems to be happening in The Center Lane of American politics and what the view from the Center reveals about the events in the left and right lanes. Your Host, John T. Burke, Jr., earned his Bachelor of Arts degree from Boston College with a double major in Speech Communications and Philosophy. He earned his law degree (Juris Doctor) from the Illinois Institute of Technology / Chicago-Kent College of Law.
