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Obama Backpedals To Save His Presidency

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President Obama’s demotion of his Chief of Staff, Bill Daley, has drawn quite a bit of attention – despite efforts by the White House to downplay the significance of that event.  The demotion of Daley is significant because it indicates that Obama is now trying to back away from his original strategy of helping Wall Street at the expense of Main Street.  This move appears to be an attempt by Obama to re-cast himself as a populist, in response to the widespread success of the Occupy Wall Street movement.

In September of 2010, I wrote a piece entitled, “Where Obama Went Wrong”.  Despite the subsequent spin by right-wing pundits, to the effect that voters had been enamored with the Tea Party’s emphasis on smaller government, the true reasons for the mid-term disaster for the Democrats had become obvious:

During the past week, we’ve been bombarded with explanations from across the political spectrum, concerning how President Obama has gone from wildly-popular cult hero to radioactive force on the 2010 campaign trail.  For many Democrats facing re-election bids in November, the presence of Obama at one of their campaign rallies could be reminiscent of the appearance of William Macy’s character from the movie, The Cooler.  Wikipedia’s discussion of the film provided this definition:

In gambling parlance, a “cooler” is an unlucky individual whose presence at the tables results in a streak of bad luck for the other players.

*   *   *

The American people are hurting because their President sold them out immediately after he was elected.  When faced with the choice of bailing out the zombie banks or putting those banks through temporary receivership (the “Swedish approach” – wherein the bank shareholders and bondholders would take financial “haircuts”) Obama chose to bail out the banks at taxpayer expense.  So here we are  . . .  in a Japanese-style “lost decade”.  In case you don’t remember the debate from early 2009 – peruse this February 10, 2009 posting from the Calculated Risk website.  After reading that, try not to cry after looking at this recent piece by Barry Ritholtz of The Big Picture entitled, “We Should Have Gone Swedish  . . .”

Back in December of 2009, Bill Daley – a minion of The Dimon Dog at JPMorgan Chase – wrote an op-ed piece for The Washington Post, which resonated with Wall Street’s tool in the White House.  Daley claimed that Obama and other Democrats were elected to office in 2008 because voters had embraced some pseudo-centrist ideas, which Daley referenced in these terms:

These independents and Republicans supported Democrats based on a message indicating that the party would be a true Big Tent — that we would welcome a diversity of views even on tough issues such as abortion, gun rights and the role of government in the economy.

*   *   *

All that is required for the Democratic Party to recover its political footing is to acknowledge that the agenda of the party’s most liberal supporters has not won the support of a majority of Americans — and, based on that recognition, to steer a more moderate course on the key issues of the day, from health care to the economy to the environment to Afghanistan.

Unfortunately, Obama was pre-disposed to accept this rationale, keeping his policy decisions on a trajectory which has proven as damaging to his own political future as it has been to the future of the American middle class.

On November 8, Jonathan Chait wrote a piece for New York magazine’s Daily Intel blog, wherein he explained that the demotion of Bill Daley revealed a “course correction” by Obama, in order to a pursue a strategy “in line with the realities of public opinion”.  Jonathan Chait explained how the ideas espoused by Daley in his 2009 Washington Post editorial, had been a blueprint for failure:

Daley, pursuing his theory, heavily courted business leaders.  He made long-term deficit reduction a top priority, and spent hours with Republican leaders, meeting them three-quarters of the way in hopes of securing a deal that would demonstrate his centrism and bipartisanship.  The effort failed completely.

The effort failed because Daley’s analysis – which is also the analysis of David Brooks and Michael Bloomberg – was fatally incorrect.  Americans were not itching for Obama to make peace with corporate America.  Americans are in an angry, populist mood – distrustful of government, but even more distrustful of business.  In the most recent NBC/The Wall Street Journal poll, 60 percent of Americans strongly agreed with the following statement:

The current economic structure of the country is out of balance and favors a very small proportion of the rich over the rest of the country.  America needs to reduce the power of major banks and corporations and demand greater accountability and transparency.  The government should not provide financial aid to corporations and should not provide tax breaks to the rich.

At the website of economist Brad DeLong, a number of comments were posted in response to Jonathan Chait’s essay.  One can only hope that our President has the same, clear understanding of this situation as do the individuals who posted these comments:

Full Employment Hawk said:

.   .   .   The defeat of the Democrats was due to the fact that the Obama administration did too little, not because it did too much.

Daley’s view that it was because the moderately progressive policies of the Obama administration were too far left for the center was totally wrong.  And listening to Daley’s advice to further shift from job creation to deficit reduction was a major blunder that reinforced the blunder of the first two years of dropping the ball on making the economy grow fast enough for the unemployment rate to be coming down significantly by the time of the Fall election.

In reply to the comment posted by Full Employment Hawk, a reader, identified as “urban legend” said this:

Obama should have been making the point over and over and over and over that getting more money into the hands of more Americans — principally right now by creating jobs — is the most pro-business stance you can take.  Continuing to let the 1% dictate everything in their favor is the most anti-business thing you can do.  We are the ones who want demand to rise for the goods and services of American business.  Right-wingers don’t care much about that.  What they do care about is maintaining their theology against all the evidence of its massive failure.

At Politico, Jonathan Chait’s essay provoked the following comment from Ben Smith:

It is entirely possible that no staff shift, and no ideological shift, can save Obama from a bad economy.  You don’t get to run controlled experiments in politics.

But it does seem worth noting that this argument pre-dates Daley: It’s the substance of the 2008 debate between Hillary Clinton and Obama, with Clinton portraying Obama as naive in his dream of bipartisan unity, and the Republicans as an implacable foe.  It’s the Clinton view, the ’90s view, that has prevailed here.

Indeed, it would be nice for all of us if Obama could get a “Mulligan” for his mishandling of the economic crisis.  Unfortunately, this ain’t golf.


Left Out

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Support for President Obama’s re-election bid is in disarray.  His sinking poll numbers have left many Democrats hoping for a miracle (i.e. some degree of economic recovery before November of 2012).  A significant component of the party’s progressive bloc is looking for a challenger to step forward – as can be seen at the StopHoping.org website.  One of the bloggers at Corrente – Hugh – recently had a good laugh at those who were anticipating a possible Primary challenge to Obama from former Wisconsin Senator Russ Feingold.  Here is some of what Hugh had to say:

The point is that Feingold could have been, and should have been, if he were legit, a focus for progressive organizing.  But he wasn’t.  . . . Feingold could have been the voice of opposition to Bush and his policies, but the silence from the Wisconsin Senator’s office was deafening.  He could have played the same role opposing Obama’s right wing corporatist agenda.  He did not.  Indeed he lost his Senate seat largely because of his failure to distance himself from Obama.

There are other reasons to dislike Feingold and question his progressive credentials.  He voted for John Roberts as Chief Justice of the Supreme Court. He voted for Obamacare.  And he is a deficit hawk.

Many left-leaning commentators have been offering suggestions to the President as to what actions he should be taking – as well as what message he should be delivering.  Experience has demonstrated that Obama never pays attention to well-intentioned, sensible advice.  How many times has Robert Reich written a roadmap for the President to use toward saving the economy as well as Obama’s own Presidency – only to be ignored?  As the campaign drags on, try to keep count of how many commentaries are written under the theme:  “What Obama Needs to Say and Do Right Now”.  Rest assured that he won’t say or do any of it.

Meanwhile, Republican voters are currently flocking to the standard-bearer du jour, Texas Governor Rick Perry.  Alexander Cockburn of CounterPunch wrote a great essay about Perry’s unmatched political instincts and the challenges ahead for both parties in the upcoming Presidential race:

The obvious question is whether Perry, having won the right, can clamber back along the kook branch towards something vaguely resembling the solid timber of sanity, to capture the necessary independents and disillusioned folk who bet on Obama in 2008.  Hard to say.  Perry is pretty far out on the limb.  Reagan, with the strenuous help of the press, managed the crawl back in 1980, amid widespread disappointment and disgust with Jimmy Carter.  Disappointment and disgust with Barack Obama?  The president has slithered down in the most recent polls, and now is just above the 50 per cent disapproval rating.  There are still around 30 million Americans without work, or enough work. There’s the endlessly cited observation that no president presiding over more than a 7 per cent jobless rate can hope for a second term.

The progressive sector is already rallying the Obama vote by pounding out the unsurprising message that Perry is a shil and errand boy for corporate America, Amazing! Imagine that a conservative Texas Republican would end up in that corner, arm in arm with Barack Obama, messenger of hope and change, also shil and errand boy for corporate America, starting with the nuclear industry, the arms sector, the ag/pesticide complex and moving on through Wall Street and the Fed, and equipped with truly noxious beliefs about fiscal discipline, the merits of compromise.  He’s a far more dangerous man to have in the Oval Office than Perry.  We need a polarizer to awaken the left from its unending, unbreakable infatuation with our current president, despite all the horrors he has perpetrated and presided over, most significantly the impending onslaught on Social Security and Medicare.

Any Republican who wants to maintain a viable candidacy will be forced to start taking some hard swings at Rick Perry.  Jon Huntsman has already started to do so.  Michele Bachmann might not, if she wants a shot at becoming Perry’s running mate.  It won’t matter what Ron Paul says … because the mainstream media are pretending as though he doesn’t exist.  If you haven’t seen it yet, Jon Stewart ran a superb piece, exhibiting how all of the major news outlets – including Fox – were apparently reading from the same script after Congressman Paul came within 100 votes of beating Michele Bachmann in the Iowa Straw Poll.  Watching those reports could have led one to believe that Ron Paul had dropped out of the race.  On August 17, Tara Sartor of the Pew Research Center’s Project for Excellence in Journalism provided this analysis of how the television news organizations squelched Ron Paul’s near-victory in Iowa:

In a further attempt to gauge the post-straw poll attention to Paul’s campaign, PEJ also used the Snapstream server’s closed captioning capability to assess the candidates’ television coverage in the first few days after that balloting.

The sample included the three network Sunday morning panel shows on August 14, the morning and evening network news programs on August 15 and four hours of prime-time cable and one hour of daytime from each of the three major cable news networks on August 15.

According to that analysis, Paul was mentioned just 29 times. By comparison, Perry was mentioned 371 times, Bachmann was mentioned 274 times, and Romney was mentioned 183 times.

I hope that the anti-Paul conspiracy helps to energize those voters who had been ambivalent about supporting the “other Texan” in the race.

At some point, the progressive Democrats are going to be faced with the ugly reality that they don’t have a candidate in the 2012 Presidential campaign.  As has been the case with Ron Paul and his supporters – the Left will be left out.


 

Those Smart Bond Traders

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There seems to be a consensus that bond traders are smarter than stock traders.  Consider this thought from Investopedia’s Financial Edge website:

Many investors believe bond traders understand the economy better than equity traders.  Bond traders pay very close attention to any economic factor that might affect interest rates.  Equity traders recognize that changes in bond prices provide a good indication of what bond traders think of the economy.

Widespread belief that Ben Bernanke’s Zero Interest Rate Policy (ZIRP) has created a stock market “bubble” has led to fear that the bubble may soon pop and cause the market to crash.  It was strange to see that subject discussed by John Melloy at CNBC, given the news outlet’s reputation for stock market cheerleading. Nevertheless, Mr. Melloy recently presented us with some ominous information:

The Yale School of Management since 1989 has asked wealthy individual investors monthly to give the “probability of a catastrophic stock market crash in the U.S. in the next six months.”

In the latest survey in December, almost 75 percent of respondents gave it at least a 10 percent chance of happening.  That’s up from 68 percent who gave it a 10 percent probability last April, just before the events of May 6, 2010.

*   *   *

The Flash Crash Commission – containing members of the CFTC and SEC – made a series of recommendations for improving market structure Friday, including single stock circuit breakers, a more reliable audit trail on trades, and curbing the use of cancelled trades by high-frequency traders.  They still don’t know what actually caused the nearly 1,000-point drop in the Dow Jones Industrial Average in a matter of minutes.

*   *   *

Overall volume has been very light in the market though, as the individual investor put more money into bonds last year than stocks in spite of the gains.  Strategists said this has been one of the longer bull markets (starting in March 2009) with barely any retail participation.  Flows into equity mutual funds did turn positive in January and have continued this month however, according to ICI and TrimTabs.com.  Yet the fear of a crash persists.

Whether or not one is concerned about the possibility of a market crash, consensual ambivalence toward equities is on the rise.  Felix Salmon recently wrote an article for The New York Times entitled, “Wall Street’s Dead End”, which began with the observation that the number of companies listed on the major domestic exchanges peaked in 1997 and has been declining ever since.  Mr. Salmon discussed the recent trend toward private financing of corporations, as opposed to the tradition of raising capital by offering shares for sale on the stock exchanges:

Only the biggest and oldest companies are happy being listed on public markets today.  As a result, the stock market as a whole increasingly fails to reflect the vibrancy and heterogeneity of the broader economy.  To invest in younger, smaller companies, you increasingly need to be a member of the ultra-rich elite.

At risk, then, is the shareholder democracy that America forged, slowly, over the past 50 years.  Civilians, rather than plutocrats, controlled corporate America, and that relationship improved standards of living and usually kept the worst of corporate abuses in check.  With America Inc. owned by its citizens, the success of American business translated into large gains in the stock portfolios of anybody who put his savings in the market over most of the postwar period.

Today, however, stock markets, once the bedrock of American capitalism, are slowly becoming a noisy sideshow that churns out increasingly meager returns.  The show still gets lots of attention, but the real business of the global economy is inexorably leaving the stock market — and the vast majority of us — behind.

Investors who decided to keep their money in bonds, heard some discouraging news from bond guru Bill Gross of PIMCO on February 2.   Gus Lubin of The Business Insider provided a good summary of what Bill Gross had to say:

His latest investment letter identifies four scenarios in which bondholders would get burned.  Basically these are sovereign default, currency devaluation, inflation, and poor returns relative to other asset classes.

In other words, you can’t win.  Gross compares Ben Bernanke to the devil and calls ZIRP a devil’s haircut:  “This is not God’s work – it has the unmistakable odor of Mammon.”

Gross recommends putting money in foreign bonds and other assets that yield more than Treasuries.

I was particularly impressed with what Bill Gross had to say about the necessary steps for making America more competitive in the global marketplace:

We need to find a new economic Keynes or at least elect a chastened Congress that can take our structurally unemployed and give them a chance to be productive workers again.  We must have a President whose idea of “centrist” policy is not to hand out presents to the right and the left and then altruistically proclaim the benefits of bipartisanship.  We need a President who does more than propose “Win The Future” at annual State of the Union addresses without policy follow-up.  America requires more than a makeover or a facelift.  It needs a heart transplant absent the contagious antibodies of money and finance filtering through the system.  It needs a Congress that cannot be bought and sold by lobbyists on K Street, whose pockets in turn are stuffed with corporate and special interest group payola.  Are record corporate profits a fair price for America’s soul?  A devil’s bargain more than likely.

You can’t discuss bond fund managers these days, without mentioning Jeffrey Gundlach, who recently founded DoubleLine Capital.  Jonathan Laing of Barron’s wrote a great article about Gundlach entitled “The King of Bonds”.  When I reached the third paragraph of that piece, I had to re-read this startling fact:

His DoubleLine Total Return Bond Fund (DBLTX), with $4.5 billion of assets as of Jan. 31, outperformed every one of the 91 bond funds in the Morningstar intermediate-bond-fund universe in 2010, despite launching only in April.  It notched a total return of 16.6%, compared with returns of 8.36% for the giant Pimco Total Return Fund (PTTAX), run by the redoubtable Bill Gross  . . .

The essay described how Gundlach’s former employer, TCW, feared that Gundlach was planning to leave the firm.  Accordingly, TCW made a pre-emptive strike and fired Gundlach.  From there, the story gets more interesting:

Five weeks after Gundlach’s dismissal, TCW sued the manager, four subordinates and DoubleLine for allegedly stealing trade secrets, including client lists, transaction information and proprietary security-valuation systems.  The suit also charged that a search of Gundlach’s offices had turned up a trove of porn magazines, X-rated DVDs and sexual devices, as well as marijuana.

*    *    *

He charges TCW with employing “smear tactics … to destroy our business.” As for “the sex tapes and such,” he says, they represented “a closed chapter in my life.”

That’s certainly easy to understand.  Porn just hasn’t been the same since Ginger Lynn retired.

Jeff Gundlach’s December webcast entitled, “Independence Day” can be found here.  Take a good look at the graph on page 16:  “Top 0.1% Income Earners Share of Total Income”.  It’s just one of many reminders that our country is headed in the wrong direction.



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Tool-Trashing Time

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I never liked Joe “The Tool” Lieberman.  If you run that name (nickname included) on the search bar at the upper-right corner of this page, you will find a total of 13 previous entries wherein I discussed him in uncomplimentary terms.  What bugs me most about Lieberman is that so many people consider him as the personification of centrism.  I believe that Lieberman gives centrism a bad name because he is simply an opportunist.    The guy doesn’t really appear to stand for anything in particular – he is simply a tool for whatever lobbyist or other interest group is willing to play his quid pro quo game.  After Lieberman lost the Democratic Primary for his Senate seat in 2006, he chose to run as an Independent and in the process, he betrayed those individuals who contributed to his election campaign, believing that Lieberman would champion the causes he advanced before he had to sell his soul to Bush and Cheney in order to save his political hide.  It was only because Ned Lamont (the man who defeated him in the Democratic Primary) came down with a bad case of  The Smug – spending more time vacationing than campaigning for the November election – that Lieberman managed to win a fourth term as junior Senator from Connecticut.

Needless to say, Emily Bazelon’s recent article for Slate, “Good Riddance, Joe Lieberman – Why I loathe my Connecticut Senator” was a real treat.  It was nice to see that a good number of people were as thrilled as I to hear that The Tool was calling it quits.  While discussing the celebratory outpouring of enthusiasm by anti-Lieberman-ites Ms. Bazelon mentioned this:

Another friend, Judy Chevalier, burned up her iPad tonight when I asked her to enumerate why she hates Joe Lieberman.  She ticked off a half-dozen reasons and then said, “The thing is, I did not come up with most of these myself.  They come from many rounds of playing the peculiar Connecticut liberal cocktail party game ‘I hated Joe Lieberman before you hated Joe Lieberman.’ ”  Longtime Lieberman haters, she says, look all the way back to 1993, when Lieberman led a hedge-fund-friendly charge in the Senate against the Financial Accounting Standards Board, which at the time wanted to close the accounting loophole that let corporations duck the recording of stock options on their balance sheets.

As an aside, the first half of that passage was characterized as “the money quote” by the Red State blog and other far-right commentators, anxious to avenge Sarah Palin since her “crosshairs” SarahPac campaign ad was criticized after the attempted assassination of Representative Gabrielle Giffords.  The magic word, “hate” gave the hard right the opportunity to argue that “liberals hate politicians, too”.  Actually, the real “money quote” can be found by clicking on the highlighted language discussing the fight over the Financial Accounting Standards Board rules:

Corporate America aligned with the accounting industry to fight the FASB proposal, with the result that in 1994, the Senate, led by Senator Joseph Lieberman (D-Conn.), passed a non-binding resolution condemning the proposal by a vote of 88-to-9.

“It wasn’t an accounting debate,” says Jim Leisenring, the vice chairman of FASB from 1988 to 2000.  “We switched from talking about, ‘Have we accurately measured the option?’ or, ‘Have we expensed the option on the proper date?’ to things like, ‘Western civilization will not exist without stock options,’ or, ‘There won’t be jobs anymore for people without stock options.’ … People tried to take the argument away from the accounting to be just plainly a political argument.”

Does that rhetoric sound familiar?

After his 2006 victory, Lieberman continued to betray the people of Connecticut by abandoning his duties in the Senate to follow John McCain all along the 2008 campaign trail (including McCain’s trip to Afganistan) in the hope of securing a place for himself in the would-be McCain administration.  The Tool knew he would never win a fifth term in the Senate.  His only hope was to latch on to McCain’s pantsleg and hang on for dear life.  In the wake of that fiasco, The Tool’s approval rating continued to slide and by October of 2010, it was down to 31 percent.  A fifth term in the Senate was definitely out of the question.  His campaign war chest could be put to better uses – such as buying “friendships” before beginning a new career as a lobbyist.

Despite Lieberman’s crucial effort in the repeal of the military’s “don’t ask – don’t tell” policy, it is interesting to observe how many gay people are willing to overlook that good deed while celebrating Lieberman’s retirement.  A review of the comments at the joemygod blog exposes these reactions:

Good riddance.  DADT capped an otherwise awful career as a spoiler.

*   *   *

Thanks for DADT, but not terribly sorry you’re leaving the Senate.  And I really didn’t want the anxiety of watching a 3-way race in CT, which might have sent a wingnut from the Right to the Senate.

*   *   *

good riddance to the man who killed the public option to satisfy his insurance industry friends in Connecticut. a terrible person

So much for that legacy thing   .   .   .

Daniela Altimari of The Hartford Courant’s CapitolWatch blog, revealed a wide spectrum of reactions to Lieberman’s announcement.  As one might expect, the remarks from politicians were painfully cordial, polite and not worth our time here.  I’ll provide you with two of the more interesting quotes:

“Joe Lieberman took millions from insurance companies, Wall Street banks, and other corporate interests – and then did their dirty work in Congress, including killing the public option.  As a result, Lieberman’s poll numbers were disastrous in Connecticut.  His decision to quit in the face of assured defeat is a huge victory for the progressive movement and all Americans who want Democrats to put regular families ahead of corporate interests.”

–  Keauna Gregory, Progressive Change Campaign Committee

*   *   *

“Of all the horrible things Joe Lieberman has done in his hideous career, depriving everyone of the joy at seeing him lose is near the top”

–  Glenn Greenwald of Salon (via Twitter)

The Connecticut Mirror provided these reactions:

“It’s the first thing he’s done in 10 years to make Connecticut Democrats completely happy.”

–  Bill Curry, former state comptroller, as quoted in The New York Times

*   *   *

“He couldn’t leave the Senate fast enough as far as I’m concerned. He’s not only driving Democrats nuts down here, but he’s become a right-wing extremist on everything except the environment and gay rights.”

–  Ralph Nader, as quoted in The Hartford Courant

*   *   *

“He will leave behind a long list of achievements, from helping to consolidate the nation’s intelligence gathering services in a way that appears to make it more difficult to gather intelligence, to threatening to filibuster the health care reform act until it had been watered down to suit his own high principles.  You will find it all in my upcoming book, ‘Everything Bad Is Joe Lieberman’s Fault.’ ”

–  Gail Collins, writing in The New York Times

As we approach The Tool’s final days in the Senate, I will be looking forward to similar tributes.



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