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The Betrayal

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March 23, 2009

We the people, who voted for Barack Obama, are about to get ripped off by our favorite Hope dealer.  Throughout the recent controversy arising from the huge bonuses paid to AIG executives, President Obama has done quite a bit of hand wringing over the fact that the government is rewarding “the very same people who got us into this mess”.  Treasury Secretary, “Turbo” Tim Geithner is now rolling out the administration’s so-called Financial Stability Plan, wherein once again, “the very same people who got us into this mess” will be rewarded with our tax dollars.  Over a trillion dollars of taxpayer money will be used to either buy back or insure an arbitrarily-assigned value for the infamous mortgage-backed securities.  The purpose of this exercise will be to prevent the bankers themselves from losing money.  The country’s top economists, including two Nobel Prize winners (Paul Krugman and Joseph Stiglitz) have advocated a different solution:  placing those banks that are about to fail into “temporary receivership”.  However, this process would result in a significant reduction of the stock prices for those banks, in addition to replacement of the management of those institutions.  The big-shot bankers won’t put up with this.

In Sunday’s New York Times, Frank Rich referenced a reader’s observation that this is President Obama’s “Katrina Moment”.  How the new President responds to this crisis will likely shape “the trajectory of his term”.  I prefer to call it Obama’s “Yellow Cake Moment”, since he and his administration are bent on selling a lie (the likelihood that the Financial Stability Plan can succeed) to the public in order to further assist the bad bankers.  It is similar to when George W. Bush convinced many in Congress and the public, that Saddam Hussein was attempting to purchase yellow cake uranium to make atomic bombs (with Bush’s ultimate goal being widespread support for the invasion of Iraq).

It should be no coincidence that the Financial Stability Plan is rewarding the bad bankers, since it was prepared by some of “the very same people who got us into this mess”.  I am specifically referring to Larry Summers and Turbo Tim himself.  Frank Rich covered this point quite well in Sunday’s article.  As a result, Obama’s attempt to chastise “the very same people who got us into this mess” is quite specious, in light of the fact that some of those people have shaped his latest bank bailout.

Back during the campaign, Candidate Obama caught quite a bit of flack for talking about “putting lipstick on a pig”.  Nevertheless, his continued promotion of the various incarnations of what is essentially the same ill-conceived plan floated by former Treasury Secretary Henry Paulson, demonstrates that Obama himself is now putting lipstick on a pig.  As Paul Krugman pointed out:

Why was I so quick to condemn the Geithner plan?  Because it’s not new; it’s just another version of an idea that keeps coming up and keeps being refuted.  It’s basically a thinly disguised version of the same plan Henry Paulson announced way back in September.

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But Treasury is still clinging to the idea that this is just a panic attack, and that all it needs to do is calm the markets by buying up a bunch of troubled assets.  Actually, that’s not quite it:  the Obama administration has apparently made the judgment that there would be a public outcry if it announced a straightforward plan along these lines, so it has produced what Yves Smith calls “a lot of bells and whistles to finesse the fact that the government will wind up paying well above market for [I don’t think I can finish this on a Times blog]”

Nevertheless, “public outcry” is exactly what is warranted in response to this soon-to-be fiasco.  Most economists favor the “temporary receivership” approach, rather than the continued bailouts of insolvent banks.  The Administration’s Financial Stability Plan is just another way to reward “the very same people who got us into this mess”.  This plan is expected to cost at least one trillion dollars.  As a result, the government is about to bilk the taxpayers out of an amount in excess of 20 Bernie Madoff Ponzi schemes.

MSNBC’s Rachel Maddow has recently vilified Senator Evan Bayh’s caucus of moderate Democrats, whom she calls “Conservadems” because they have been offering some resistance to a few of Obama’s proposals.   These Senators are actually smart people who can detect the distinctive odor of snake oil.  They know better than to tie their political futures to a bank bailout plan that can destroy their own credibility with the voting public.  They know that public support of Obama’s broader agenda is hinged on how he deals with the banking problem.  As Ben Smith and Manu Raju reported for Politico:

But many lawmakers made clear Tuesday their view that voters’ willingness to trust Obama on some subjects will be determined by their view of how well he handles the economic crisis.

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“Unless we can instill some trust back with the American people that these people who brought on this problem, who risked our 401K funds and hard-working people’s money, aren’t going to be able to profit from their folly, I think we are at risk of losing their trust,” said Sen. Amy Klobuchar (D-Minn.).

Meanwhile, there’s an ill wind a-blowin’ and it’s coming from 1600 Pennsylvania Avenue.  The efforts by many pundits to blame the flawed financial policy on Geithner are misplaced.  If President Obama weren’t on board with this plan, it would have never made it outside of the Oval Office.  The problem is with Obama himself, rather than Geithner.  Unfortunately, the decision our President has made will likely turn a two-year recession into a ten-year recession.  To him, the corresponding benefit of helping out the bankers must apparently be worth it.

Obama The Centrist

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January 12, 2009

It was almost one year ago when the conservative National Journal rated Barack Obama as “the most liberal senator in 2007”.  Of course, that was back during the primary season of the 2008 Presidential campaign, when many people believed that the “liberal” moniker should have been enough to sink Obama’s Presidential aspirations.  Now, with the Inaugural just a week away, we are hearing the term “centrist” being used to describe Obama, often with a tone of disappointment.

On Sunday, January 11, David Ignatius wrote an op-ed piece for The Washington Post, entitled:  “Mr. Cool’s Centrist Gamble”.  Mr. Ignatius spelled out how Obama moved toward the political center after his election, beginning with the appointment of Rahm Emanuel as chief of staff, to appointing a Cabinet “which is so centrist it almost resembles a government of national unity”:

Since Election Day, he has taken a series of steps to co-opt his opponents and fashion a new governing majority.  It’s an admirable strategy but also a high-risk one, since the “center,” however attractive it may be in principle, is often a nebulous political never-never land.

Obama’s bet is that at a time of national economic crisis, the country truly wants unity.

The President-elect’s appearance on ABC’s January 11 broadcast of This Week with George Stephanopoulos motivated Glenn Greenwald to write on Salon.com that the interview:

. . .  provides the most compelling — and most alarming — evidence yet that all of the “centrist” and “post-partisan” chatter from Obama’s supporters will mean what it typically means:  devotion, first and foremost, to perpetuating rather than challenging how the Washington establishment functions.

Mr. Greenwald (an attorney with a background in constitutional law and civil rights litigation) began his article by taking issue with the characterization by David Ignatius that Obama’s centrist approach is something “new”.  Greenwald pointed out that for a Democratic President to make a post-election move to the center is nothing new and that Bill Clinton had done the same thing:

The notion that Democrats must spurn their left-wing base and move to the “non-ideological” center is the most conventional of conventional Beltway wisdom (which is why Ignatius, the most conventional of Beltway pundits, is preaching it).  That’s how Democrats earn their Seriousness credentials, and it’s been that way for decades.

Greenwald then focused on a point made by Mr. Obama in response to a question posed by George Stephanopoulos concerning whether the detention facility at Guantanamo will be closed within the first 100 days of the new Presidency.  The President-elect responded that:

It is more difficult than I think a lot of people realize and we are going to get it done but part of the challenge that you have is that you have a bunch of folks that have been detained, many of whom who may be very dangerous who have not been put on trial or have not gone through some adjudication.  And some of the evidence against them may be tainted even though it’s true.  And so how to balance creating a process that adheres to rule of law, habeas corpus, basic principles of Anglo American legal system, by doing it in a way that doesn’t result in releasing people who are intent on blowing us up.

The magic words in Obama’s response that caught Glenn Greenwald’s attention were:  “creating a process”.  Why should due process require creation of a new process outside of our court system?  Mr. Greenwald suspects that this “new process” will be one that allows for the admission of evidence (confessions, etc.) obtained by torture.  If what Mr. Obama has in mind is a process that will protect the secrecy of legitimately-classified information, that is one thing.  Nevertheless, I share Mr. Greenwald’s skepticism about the need for an innovative adjudication system for those detained at Guantanamo.

George Stephanopoulos made a point of directing Mr. Obama’s attention to “the most popular question” on the Change.gov website.  It came from Bob Fertik of New York City, who asked:

Will you appoint a special prosecutor ideally Patrick Fitzgerald to independently investigate the greatest crimes of the Bush administration, including torture and warrantless wiretapping?

The response given by the President-elect involved a little footwork:

We have not made final decisions, but my instinct is for us to focus on how do we make sure that moving forward we are doing the right thing.

Glenn Greenwald’s analysis of Mr. Obama’s performance on This Week, did not overlook that part of the interview:

Obama didn’t categorically rule out prosecutions — he paid passing lip service to the pretty idea that “nobody is above the law,” implied Eric Holder would have some role in making these decisions, and said “we’re going to be looking at past practices” — but he clearly intended to convey his emphatic view that he opposes “past-looking” investigations.  In the U.S., high political officials aren’t investigated, let alone held accountable, for lawbreaking, and that is rather clearly something Obama has no intention of changing.

Obama’s expressed position on whether to prosecute the crimes of the Bush administration is fairly consistent with what he has been saying all along.  Frank Rich covered this subject in his January 10 New York Times editorial:

The biggest question hovering over all this history, however, concerns the future more than the past.  If we get bogged down in adjudicating every Bush White House wrong, how will we have the energy, time or focus to deal with the all-hands-on-deck crises that this administration’s malfeasance and ineptitude have bequeathed us?  The president-elect himself struck this note last spring.  “If crimes have been committed, they should be investigated,” Barack Obama said.  “I would not want my first term consumed by what was perceived on the part of Republicans as a partisan witch hunt, because I think we’ve got too many problems we’ve got to solve.”

Henry Waxman, the California congressman who has been our most tireless inquisitor into Bush scandals, essentially agreed when I spoke to him last week.  Though he remains outraged about both the chicanery used to sell the Iraq war and the administration’s overall abuse of power, he adds:  “I don’t see Congress pursuing it. We’ve got to move on to other issues.”  He would rather see any prosecutions augmented by an independent investigation that fills in the historical record.  “We need to depoliticize it,” he says.  “If a Democratic Congress or administration pursues it, it will be seen as partisan.”

Welcome to Barack Obama’s post-partisan world.  The people at the National Journal are probably not the only ones disappointed by Obama’s apparent move to the political center.  It appears as though we will be hearing criticism about the new administration from all directions.  When he disappoints centrists, you can read about it here.