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.
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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.
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 . . .
Matt Taibbi has done it again. His latest article in Rolling Stone focused on the case of United States of America v. Carollo, Goldberg and Grimm, in which the Obama Justice Department actually prosecuted some financial crimes. The three defendants worked for GE Capital (the finance arm of General Electric) and were involved in a bid-rigging conspiracy wherein the prices paid by banks to bond issuers were reduced (to the detriment of the local governments who issued those bonds).
The broker at the center of this case was a firm known as CDR. CDR would be hired by a state or local government which was planning a bond issue. Banks would then submit bids which are interest rates paid to the issuer for holding the money until payments became due to the various contractors involved in the project which was the subject of the particular bond. The brokers would tip off a favored bank about the amounts of competing bids in return for a kickback based on the savings made by avoiding an unnecessarily high bid. In the Carollo case, the GE Capital employees were supposed to be competing with other banks who would submit bids to CDR. CDR would then inform the bidders on how to coordinate their bids so that the bid prices could be kept low and the various banks could agree among themselves as to which entity would receive a particular bond issue. Four of the banks which “competed” against GE Capital in the bidding were UBS, Bank of America, JPMorgan Chase and Wells Fargo. Those four banks paid a total of $673 million in restitution after agreeing to cooperate in the government’s case.
The brokers would also pay-off politicians who selected their firm to handle a bond issue. Matt Taibbi gave one example of how former New Mexico Governor Bill Richardson received $100,000 in campaign contributions from CDR. In return, CDR received $1.5 million in public money for services which were actually performed by another broker – at an additional cost.
Needless to say, the mainstream news media had no interest in covering this case. Matt Taibbi quoted a remark made to the jury at the outset of the case by the trial judge, Harold Baer: “It is unlikely, I think, that this will generate a lot of media publicity”. Although the judge’s remark was intended to imply that the subject matter of the case was too technical and lacking in the “sex appeal” of the usual evening news subject, it also underscored the aversion of mainstream news outlets to expose the wrongdoing of their best sponsors: the big banks.
Beyond that, this case exploded a myth – often used by the Justice Department as an excuse for not prosecuting financial crimes. As Taibbi explained at the close of the piece:
There are some who think that the government is limited in how many corruption cases it can bring against Wall Street, because juries can’t understand the complexity of the financial schemes involved. But in USA v. Carollo, that turned out not to be true. “This verdict is proof of that,” says Hausfeld, the antitrust attorney. “Juries can and do understand this material.”
One important lesson to be learned from the Carollo case is a simple fact that the mainstream news media would prefer to ignore: This is but one tiny example of the manner in which business is conducted by the big banks. As Matt Taibbi explained:
The men and women who run these corrupt banks and brokerages genuinely believe that their relentless lying and cheating, and even their anti-competitive cartelstyle scheming, are all legitimate market processes that lead to legitimate price discovery. In this lunatic worldview, the bidrigging scheme was a system that created fair returns for everyone.
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That, ultimately, is what this case was about. Capitalism is a system for determining objective value. What these Wall Street criminals have created is an opposite system of value by fiat. Prices are not objectively determined by collisions of price information from all over the market, but instead are collectively negotiated in secret, then dictated from above
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Last year, the two leading recipients of public bond business, clocking in with more than $35 billion in bond issues apiece, were Chase and Bank of America – who combined had just paid more than $365 million in fines for their role in the mass bid rigging. Get busted for welfare fraud even once in America, and good luck getting so much as a food stamp ever again. Get caught rigging interest rates in 50 states, and the government goes right on handing you billions of dollars in public contracts.
By now we are all familiar with the “revolving door” principle, wherein prosecutors eventually find themselves working for the law firms which represent the same financial institutions which those prosecutors should have dragged into court. At the Securities and Exchange Commission, the same system is in place. Worst of all is the fact that our politicians – who are responsible for enacting laws to protect the public from such criminal enterprises as what was exposed in the Carollo case – are in the business of lining their pockets with “campaign contributions” from those entities. You may have seen Jon Stewart’s coverage of Jamie Dimon’s testimony before the Senate Banking Committee. How dumb do the voters have to be to reelect those fawning sycophants?
Yet it happens . . . over and over again. From the Great Depression to the Savings and Loan scandal to the financial crisis and now this bid-rigging scheme. The culprits never do the “perp walk”. Worse yet, they continue on with “business as usual” partly because the voting public is too brain-dead to care and partly because the mainstream news media avoid these stories. Our political system is incapable of confronting this level of corruption because the politicians from both parties are bought and paid for by the banking cabal. As Paul Farrell of MarketWatch explained:
Seriously, folks, the elections are relevant. Totally. Oh, both sides pretend it matters. But it no longer matters who’s president. Or who’s in Congress. Money runs America. And when it comes to the public interest, money is not just greedy, but myopic, narcissistic and deaf. Money from Wall Street bankers, Corporate CEOs, the Super Rich and their army of 261,000 highly paid mercenary lobbyists. They hedge, place bets on both sides. Democracy is dead.
Why would anyone expect America to solve any of its most pressing problems when the officials responsible for addressing those issues have been compromised by the villains who caused those situations?
For the past few years, a central mission of this blog has been to focus on Washington’s unending efforts to protect, pamper and bail out the Wall Street megabanks at taxpayer expense. From Maiden Lane III to TARP and through countless “backdoor bailouts”, the Federal Reserve and the Treasury Department have been pumping money into businesses which should have gone bankrupt in 2008. Worse yet, President Obama and Attorney General Eric Hold-harmless have expressed no interest in bringing charges against those miscreants responsible for causing the financial crisis. The Federal Reserve’s latest update to its Survey of Consumer Finances for 2010 revealed that during the period of 2007-2010, the median family net worth declined by a whopping thirty-eight percent. Despite the massive extent of wealth destruction caused by the financial crisis, our government is doing nothing about it.
I have always been a fan of economist John Hussman of the Hussman Funds, whose Weekly Market Comment essays are frequently referenced on this website. Professor Hussman’s most recent piece, “The Heart of the Matter” serves as a manifesto of how the financial crisis was caused, why nothing was done about it and why it is happening again both in the United States and in Europe. Beyond that, Professor Hussman offers some suggestions for remedying this unaddressed and unresolved set of circumstances. It is difficult to single out a passage to quote because every word of Hussman’s latest Market Comment is precious. Be sure to read it. What I present here are some hints as to the significance of this important essay:
The ongoing debate about the economy continues along largely partisan lines, with conservatives arguing that taxes just aren’t low enough, and the economy should be freed of regulations, while liberals argue that the economy needs larger government programs and grand stimulus initiatives.
Lost in this debate is any recognition of the problem that lies at the heart of the matter: a warped financial system, both in the U.S. and globally, that directs scarce capital to speculative and unproductive uses, and refuses to restructure debt once that debt has gone bad.
Specifically, over the past 15 years, the global financial system – encouraged by misguided policy and short-sighted monetary interventions – has lost its function of directing scarce capital toward projects that enhance the world’s standard of living. Instead, the financial system has been transformed into a self-serving, grotesque casino that misallocates scarce savings, begs for and encourages speculative bubbles, refuses to restructure bad debt, and demands that the most reckless stewards of capital should be rewarded through bailouts that transfer bad debt from private balance sheets to the public balance sheet.
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By our analysis, the U.S. economy is presently entering a recession. Not next year; not later this year; but now. We expect this to become increasingly evident in the coming months, but through a constant process of denial in which every deterioration is dismissed as transitory, and every positive outlier is celebrated as a resumption of growth. To a large extent, this downturn is a “boomerang” from the credit crisis we experienced several years ago. The chain of events is as follows:
Financial deregulation and monetary negligence -> Housing bubble -> Credit crisis marked by failure to restructure bad debt -> Global recession -> Government deficits in U.S. and globally -> Conflict between single currency and disparate fiscal policies in Europe -> Austerity -> European recession and credit strains -> Global recession.
In effect, we’re going into another recession because we never effectively addressed the problems that produced the first one, leaving us unusually vulnerable to aftershocks. Our economic malaise is the result of a whole chain of bad decisions that have distorted the financial markets in ways that make recurring crisis inevitable.
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Every major bank is funded partially by depositors, but those deposits typically represent only about 60% of the funding. The rest is debt to the bank’s own bondholders, and equity of its stockholders. When a country like Spain goes in to save a failing bank like Bankia – and does so by buying stock in the bank – the government is putting its citizens in a “first loss” position that protects the bondholders at public expense. This has been called “nationalization” because Spain now owns most of the stock, but the rescue has no element of restructuring at all. All of the bank’s liabilities – even to its own bondholders – are protected at public expense. So in order to defend bank bondholders, Spain is increasing the public debt burden of its own citizens. This approach is madness, because Spain’s citizens will ultimately suffer the consequences by eventual budget austerity or risk of government debt default.
The way to restructure a bank is to take it into receivership, write down the bad assets, wipe out the stockholders and much of the subordinated debt, and then recapitalize the remaining entity by selling it back into the private market. Depositors don’t lose a dime. While the U.S. appropriately restructured General Motors – wiping out stock, renegotiating contracts, and subjecting bondholders to haircuts – the banking system was largely untouched.
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If it seems as if the global economy has learned nothing, it is because evidently the global economy has learned nothing. The right thing to do, again, is to take receivership of insolvent banks and wipe out the stock and subordinated debt, using the borrowed funds to protect depositors in the event that the losses run deep enough to eat through the intervening layers of liabilities (which is doubtful), and otherwise using the borrowed funds to stimulate the economy after the restructuring occurs. We’re going to keep having crises until global leaders recognize that short of creating hyperinflation (which also subordinates the public, in this case by destroying the value of currency), there is no substitute for debt restructuring.
For some insight as to why the American megabanks were never taken into temporary receivership, it is useful to look back to February of 2010 when Michael Shedlock (a/k/a“Mish”) provided us with a handy summary of the 224-page Quarterly Report from SIGTARP (the Special Investigator General for TARP — Neil Barofsky). My favorite comment from Mish appeared near the conclusion of his summary:
Clearly TARP was a complete failure, that is assuming the goals of TARP were as stated.
My belief is the benefits of TARP and the entire alphabet soup of lending facilities was not as stated by Bernanke and Geithner, but rather to shift as much responsibility as quickly as possible on to the backs of taxpayers while trumping up nonsensical benefits of doing so. This was done to bail out the banks at any and all cost to the taxpayers.
Was this a huge conspiracy by the Fed and Treasury to benefit the banks at taxpayer expense? Of course it was, and the conspiracy is unraveling as documented in this report and as documented in AIG Coverup Conspiracy Unravels.
On January 29 2010, David Reilly wrote an article for Bloomberg BusinessWeek concerning the previous week’s hearing before the House Committee on Oversight and Government Reform. After quoting from Reilly’s article, Mish made this observation:
Most know I am not a big believer in conspiracies. I regularly dismiss them. However, this one was clear from the beginning and like all massive conspiracies, it is now in the light of day.
The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week’s congressional hearing into the bailout of American International Group Inc., you have to wonder if those folks are crazy after all.
Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.
That “secretive group” is The Federal Reserve of New York, whose president at the time of the AIG bailout was “Turbo” Tim Geithner. David Reilly’s disgust at the hearing’s revelations became apparent from the tone of his article:
By pursuing this line of inquiry, the hearing revealed some of the inner workings of the New York Fed and the outsized role it plays in banking. This insight is especially valuable given that the New York Fed is a quasi-governmental institution that isn’t subject to citizen intrusions such as freedom of information requests, unlike the Federal Reserve.
At least in the Eurozone there is fear that the taxpayers will never submit to enhanced economic austerity measures, which would force the citizenry into an impoverished existence so that their increased tax burden could pay off the debts incurred by irresponsible bankers. In the United States there is no such concern. The public is much more compliant. Whether that will change is anyone’s guess.
Most investors have been lamenting the recent stock market swoon. The Dow Jones Industrial Average has given up all of the gains earned during 2012. The economic reports keep getting worse by the day. Yet, for some people all of this is good news . . .
You might find them scattered along the curbs of Wall Street . . . with glazed eyes . . . British teeth . . . and mysterious lesions on their skin. They approach Wall Street’s upscale-appearing pedestrians, making such requests as: “POMO?” . . . “Late-day rally?” . . . “Animal Spirits?” These desperate souls are the “POMO junkies”. Since the Federal Reserve concluded the last phase of quantitative easing in June of 2011, the POMO junkies have been hopeless. They can’t survive without those POMO auctions, wherein the New York Fed would purchase Treasury securities – worth billions of dollars – on a 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 high-beta, Russell 2000 stocks. You saw the results: A booming stock market – despite a stalled economy.
Since I first wrote about the POMO junkies last summer, they have resurfaced on a few occasions – only to slink back into the shadows as the rumors of an imminent Quantitative Easing 3 were debunked.
The recent spate of awful economic reports and the resulting stock market nosedive have rekindled hopes that the Federal Reserve will crank-up its printing press once again, for the long-awaited QE 3. Economist John Hussman discussed this situation on Monday:
At this point, the S&P 500 has achieved a cumulative total return of less than 10% since April 2010. Meanwhile, of course, there remains a great deal of faith in the “Bernanke put,” because even though it’s fairly obvious that QE has done nothing durable for the economy or the financial markets over the last couple of years, a hit of QE might at least be good for a few months of “risk on” delirium. If the American public can’t get thoughtful economic leadership, at least Wall Street’s speculative junkies can hope for a little taste of Q from Sugar Daddy.
One of the problems with QE here, however, is that it would essentially represent fiscal policy for the benefit of speculators, at taxpayer expense. To see this, note that the 10-year Treasury yield is now down to less than 1.5%. One wonders how Bernanke would be able to argue, with a straight face, that this is not low enough. Nevertheless, a 10-year bond has a duration of 8 years – meaning that each 100 basis point fluctuation in interest rates is associated with a change of about 8% in the price of the bond. So if you buy the bond and hold it for a full year, an interest rate change of of 1.5/8 = .1875, or less than 20 basis points, is enough to wipe out the annual interest and leave you with a negative total return.
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“QE3 – subsidizing banks and bond speculators at taxpayer expense” – there’s a pithy slogan. That doesn’t mean the Fed will refrain from more of its recklessness (which will be nearly impossible to reverse when it becomes necessary to do so), but does anyone actually believe by now that QE would improve the economy, durably elevate risky assets beyond a few months, or materially relieve global debt strains?
Obviously, the POMO junkies have no such concerns. Beyond that, the Federal Reserve’s “third mandate” – keeping the stock market bubble inflated – will be the primary factor motivating the decision, regardless of whether those asset prices hold for more than a few months.
The POMO junkies are finally going to score. As they do, a tragic number of retail investors will be led to believe that the stock market has “recovered”, only to learn – a few months down the road – that the latest bubble has popped.
On May 22, the Congressional Budget Office released its report on how the United States can avoid going off the “fiscal cliff” on January 1, 2013. The report is entitled, “Economic Effects of Reducing the Fiscal Restraint That Is Scheduled to Occur in 2013”. Forget about the Mayan calendar and December 21, 2012. The real disaster is scheduled for eleven days later. The CBO provided a brief summary of the 10-page report – what you might call the Cliff Notes version. Here are some highlights:
In fact, under current law, increases in taxes and, to a lesser extent, reductions in spending will reduce the federal budget deficit dramatically between 2012 and 2013 – a development that some observers have referred to as a “fiscal cliff” – and will dampen economic growth in the short term.
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Under those fiscal conditions, which will occur under current law, growth in real (inflation-adjusted) GDP in calendar year 2013 will be just 0.5 percent, CBO expects – with the economy projected to contract at an annual rate of 1.3 percent in the first half of the year and expand at an annual rate of 2.3 percent in the second half. Given the pattern of past recessions as identified by the National Bureau of Economic Research, such a contraction in output in the first half of 2013 would probably be judged to be a recession.
As the complete version of the report explained, the consequences of abruptly-imposed, draconian austerity measures while the economy is in a state of anemic growth in the wake of the 2008 financial crisis, could have a devastating impact because incomes will drop, shrinking the tax base and available revenue – the life blood of the United States government:
The weakening of the economy that will result from that fiscal restraint will lower taxable incomes and, therefore, revenues, and it will increase spending in some categories – for unemployment insurance, for instance.
An interesting analysis of the CBO report was provided by Robert Oak of the Economic Populist website. He began with a description of the cliff itself:
What the CBO is referring to is the fiscal cliff. Remember when the budget crisis happened, resulting in the United States losing it’s AAA credit rating? Then, Congress and this administration just punted, didn’t compromise, or better yet, base recommendations on actual economic theory, and allowed automatic spending cuts of $1.2 trillion across the board, to take place instead. These budget cuts will be dramatic and happen in 2012 and 2013.
Spending cuts, especially sudden ones, actually weaken economic growth. This is why austerity has caused a disaster in Europe. Draconian cuts have pushed their economies into not just recessions, but depressions.
The conclusion reached by Robert Oak was particularly insightful:
This report should infuriate Republicans, who earlier wanted to silence the CBO because they were telling the GOP their policies would hurt the economy in so many words. But maybe not. Unfortunately the CBO is not breaking down tax cuts, when there is ample evidence tax cuts for rich individuals do nothing for economic growth. Bottom line though, the CBO is right on in their forecast, draconian government spending cuts will cause an anemic economy to contract.
Although the CBO did offer a good solution for avoiding a drive off the fiscal cliff, it remains difficult to imagine how our dysfunctional government could ever implement these measures:
Or, if policymakers wanted to minimize the short-run costs of narrowing the deficit very quickly while also minimizing the longer-run costs of allowing large deficits to persist, they could enact a combination of policies: changes in taxes and spending that would widen the deficit in 2013 relative to what would occur under current law but that would reduce deficits later in the decade relative to what would occur if current policies were extended for a prolonged period.
The foregoing passage was obviously part of what Robert Oak had in mind when he mentioned that the CBO report would “infuriate Republicans”. Any plans to “widen the deficit” would be subject to the same righteous indignation as an abortion festival or a national holiday for gay weddings. Nevertheless, Mitt Romney accidentally acknowledged the validity of the logic underlying the CBO’s concern. Bill Black had some fun with Romney’s admission by writing a fantastic essay on the subject:
Romney has periodic breakdowns when asked questions about the economy because he sometimes forgets the need to lie. He forgets that he is supposed to treat austerity as the epitome of economic wisdom. When he responds quickly to questions about austerity he slips into default mode and speaks the truth – adopting austerity during the recovery from a Great Recession would (as in Europe) throw the nation back into recession or depression. The latest example is his May 23, 2012 interview with Mark Halperin in Time magazine.
“Halperin: Why not in the first year, if you’re elected — why not in 2013, go all the way and propose the kind of budget with spending restraints, that you’d like to see after four years in office? Why not do it more quickly?
Romney: Well because, if you take a trillion dollars for instance, out of the first year of the federal budget, that would shrink GDP over 5%. That is by definition throwing us into recession or depression. So I’m not going to do that, of course.”
Romney explains that austerity, during the recovery from a Great Recession, would cause catastrophic damage to our nation. The problem, of course, is that the Republican congressional leadership is committed to imposing austerity on the nation and Speaker Boehner has just threatened that Republicans will block the renewal of the debt ceiling in order to extort Democrats to agree to austerity – severe cuts to social programs. Romney knows this could “throw us into recession or depression” and says he would never follow such a policy.
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Later in the interview, Romney claims that federal budgetary deficits are “immoral.” But he has just explained that using austerity for the purported purpose of ending a deficit would cause a recession or depression. A recession or depression would make the deficit far larger. That means that Romney should be denouncing austerity as “immoral” (as well as suicidal) because it will not simply increase the deficit (which he claims to find “immoral” because of its impact on children) but also dramatically increase unemployment, poverty, child poverty and hunger, and harm their education by causing more teachers to lose their jobs and more school programs to be cut.
Mitt Romney is beginning to sound as though he has his own inner Biden, who spontaneously speaks out in an unrestrained manner, sending party officials into “damage control” mode.
This could turn out to be an interesting Presidential campaign, after all.
Comments Off on Get Ready for the Next Financial Crisis
It was almost one year ago when Bloomberg News reported on these remarks by Mark Mobius, executive chairman of Templeton Asset Management’s emerging markets group:
“There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis,” Mobius said at the Foreign Correspondents’ Club of Japan inTokyotoday in response to a question about price swings. “Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes.”
I have frequently complained about the failed attempt at financial reform, known as the Dodd-Frank Act. Two years ago, I wrote a piece entitled, “Financial Reform Bill Exposed As Hoax” wherein I expressed my outrage that the financial reform effort had become a charade. The final product resulting from all of the grandstanding and backroom deals – the Dodd–Frank Act – had become nothing more than a hoax on the American public. My essay included the reactions of five commentators, who were similarly dismayed. I concluded the posting with this remark:
The bill that is supposed to save us from another financial crisis does nothing to accomplish that objective. Once this 2,000-page farce is signed into law, watch for the reactions. It will be interesting to sort out the clear-thinkers from the Kool-Aid drinkers.
During the past few days, there has been a chorus of commentary calling for a renewed effort toward financial reform. We have seen a torrent of reports on the misadventures of The London Whale at JP Morgan Chase, whose outrageous derivatives wager has cost the firm uncounted billions. By the time this deal is unwound, the originally-reported loss of $2 billion will likely be dwarfed.
Former Secretary of Labor, Robert Reich, has made a hobby of writing blog postings about “what President Obama needs to do”. Of course, President Obama never follows Professor Reich’s recommendations, which might explain why Mitt Romney has been overtaking Obama in the opinion polls. On May 16, Professor Reich was downright critical of the President, comparing him to the dog in a short story by Sir Arthur Conan Doyle involving Sherlock Holmes, Silver Blaze. The President’s feeble remarks about JPMorgan’s latest derivatives fiasco overlooked the responsibility of Jamie Dimon – obviously annoying Professor Reich, who shared this reaction:
Not a word about Jamie Dimon’s tireless campaign to eviscerate the Dodd-Frank financial reform bill; his loud and repeated charge that the Street’s near meltdown in 2008 didn’t warrant more financial regulation; his leadership of Wall Street’s brazen lobbying campaign to delay the Volcker Rule under Dodd-Frank, which is still delayed; and his efforts to make that rule meaningless by widening a loophole allowing banks to use commercial deposits to “hedge” (that is, make offsetting bets) their derivative trades.
Nor any mention Dimon’s outrageous flaunting of Dodd-Frank and of the Volcker Rule by setting up a special division in the bank to make huge (and hugely profitable, when the bets paid off) derivative trades disguised as hedges.
Nor Dimon’s dual role as both chairman and CEO of JPMorgan (frowned on my experts in corporate governance) for which he collected a whopping $23 million this year, and $23 million in 2010 and 2011 in addition to a $17 million bonus.
Even if Obama didn’t want to criticize Dimon, at the very least he could have used the occasion to come out squarely in favor of tougher financial regulation. It’s the perfect time for him to call for resurrecting the Glass-Steagall Act, of which the Volcker Rule – with its giant loophole for hedges – is a pale and inadequate substitute.
And for breaking up the biggest banks and setting a cap on their size, as the Dallas branch of the Federal Reserve recommended several weeks ago.
This was Professor Reich’s second consecutive reference within a week to The Dallas Fed’s Annual Report, which featured an essay by Harvey Rosenblum, the head of the Dallas Fed’s Research Department and the former president of the National Association for Business Economics. Rosenblum’s essay provided an historical analysis of the events leading up to the 2008 financial crisis and the regulatory efforts which resulted from that catastrophe – particularly the Dodd-Frank Act. Beyond that, Rosenblum emphasized why those “too-big-to-fail” (TBTF) banks have actually grown since the enactment of Dodd-Frank:
The TBTF survivors of the financial crisis look a lot like they did in 2008. They maintain corporate cultures based on the short-term incentives of fees and bonuses derived from increased oligopoly power. They remain difficult to control because they have the lawyers and the money to resist the pressures of federal regulation. Just as important, their significant presence in dozens of states confers enormous political clout in their quest to refocus banking statutes and regulatory enforcement to their advantage.
Last year, former Kansas City Fed-head, Thomas Hoenig discussed the problems created by the TBTFs, which he characterized as “systemically important financial institutions” – or “SIFIs”:
… I suggest that the problem with SIFIs is they are fundamentally inconsistent with capitalism. They are inherently destabilizing to global markets and detrimental to world growth. So long as the concept of a SIFI exists, and there are institutions so powerful and considered so important that they require special support and different rules, the future of capitalism is at risk and our market economy is in peril.
Although the huge derivatives loss by JPMorgan Chase has motivated a number of commentators to issue warnings about the risk of another financial crisis, there had been plenty of admonitions emphasizing the risks of the next financial meltdown, which were published long before the London Whale was beached. Back in January, G. Timothy Haight wrote an inspiring piece for the pro-Republican Orange County Register, criticizing the failure of our government to address the systemic risk which brought about the catastrophe of 2008:
In response to widespread criticism associated with the financial collapse, Congress has enacted a number of reforms aimed at curbing abuses at financial institutions. Legislation, such as the Dodd-Frank and Consumer Protection Act, was trumpeted as ensuring that another financial meltdown would be avoided. Such reactionary regulation was certain to pacify U.S. taxpayers.
Unfortunately, legislation enacted does not solve the fundamental problem. It simply provides cover for those who were asleep at the wheel, while ignoring the underlying cause of the crisis.
More than three years after the calamity, have we solved the dilemma we found ourselves in late 2008? Can we rest assured that a future bailout will not occur? Are financial institutions no longer “too big to fail?”
Regrettably, the answer, in each case, is a resounding no.
The 9 largest U.S. banks have a total of 228.72 trillion dollars of exposure to derivatives. That is approximately 3 times the size of the entire global economy. It is a financial bubble so immense in size that it is nearly impossible to fully comprehend how large it is.
The multi-billion dollar derivatives loss by JPMorgan Chase demonstrates that the sham “financial reform” cannot prevent another financial crisis. The banks assume that there will be more taxpayer-funded bailouts available, when the inevitable train wreck occurs. The Federal Reserve will be expected to provide another round of quantitative easing to keep everyone happy. As a result, nothing will be done to strengthen financial reform as a result of this episode. The megabanks were able to survive the storm of indignation in the wake of the 2008 crisis and they will be able ride-out the current wave of public outrage.
As Election Day approaches, Team Obama is afraid that the voters will wake up to the fact that the administration itself is to blame for sabotaging financial reform. They are hoping that the public won’t be reminded that two years ago, Simon Johnson (former chief economist of the IMF) wrote an essay entitled, “Creating the Next Crisis” in which he provided this warning:
On the critical dimension of excessive bank size and what it implies for systemic risk, there was a concerted effort by Senators Ted Kaufman and Sherrod Brown to impose a size cap on the largest banks – very much in accordance with the spirit of the original “Volcker Rule” proposed in January 2010 by Obama himself.
In an almost unbelievable volte face, for reasons that remain somewhat mysterious, Obama’s administration itself shot down this approach. “If enacted, Brown-Kaufman would have broken up the six biggest banks inAmerica,” a senior Treasury official said. “If we’d been for it, it probably would have happened. But we weren’t, so it didn’t.”
Whether the world economy grows now at 4% or 5% matters, but it does not much affect our medium-term prospects. The US financial sector received an unconditional bailout – and is not now facing any kind of meaningful re-regulation. We are setting ourselves up, without question, for another boom based on excessive and reckless risk-taking at the heart of the world’s financial system. This can end only one way: badly.
The public can forget a good deal of information in two years. They need to be reminded about those early reactions to the Obama administration’s subversion of financial reform. At her Naked Capitalism website, Yves Smith served up some negative opinions concerning the bill, along with her own cutting commentary in June of 2010:
I want the word “reform” back. Between health care “reform” and financial services “reform,” Obama, his operatives, and media cheerleaders are trying to depict both initiatives as being far more salutary and far-reaching than they are. This abuse of language is yet another case of the Obama Administration using branding to cover up substantive shortcomings. In the short run it might fool quite a few people, just as BP’s efforts to position itself as an environmentally responsible company did.
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So what does the bill accomplish? It inconveniences banks around the margin while failing to reduce the odds of a recurrence of a major financial crisis.
In particular, the transaction appears to have been a type of proprietary trade – which is to say, a trade that a bank undertakes to make money for itself, not its clients. And these trades were supposed to have been outlawed by the “Volcker Rule” provision of Obama’s financial reform law, at least at federally-backed banks like JP Morgan. The administration is naturally worried that, having touted the law as an end to the financial shenanigans that brought us the 2008 crisis, it will look feckless instead.
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But it turns out that there’s an additional twist here. The concern for the White House isn’t just that the law could look weak, making it a less than compelling selling point for Obama’s re-election campaign. It’s that the administration could be blamed for the weakness. It’s one thing if you fought for a tough law and didn’t entirely succeed. It’s quite another thing if it starts to look like you undermined the law behind the scenes. In that case, the administration could look duplicitous, not merely ineffectual. And that’s the narrative you see the administration trying to preempt . . .
When the next financial crisis begins, be sure to credit President Obama as the Facilitator-In-Chief.
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.
