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Obama Presidency Continues To Self-Destruct

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It’s been almost a year since the “Velma Moment”.  On September 20, 2010, President Obama appeared at a CNBC town hall meeting in Washington.  One of the audience members, Velma Hart, posed a question to the President, which was emblematic of the plight experienced by many 2008 Obama supporters.  Peggy Noonan had some fun with the event in her article, “The Enraged vs. The Exhausted” which characterized the 2010 elections as a battle between those two emotional factions.  The “Velma Moment” exposed Obama’s political vulnerability as an aloof leader, lacking the ability to emotionally connect with his supporters:

The president looked relieved when she stood.  Perhaps he thought she might lob a sympathetic question that would allow him to hit a reply out of the park.  Instead, and in the nicest possible way, Velma Hart lobbed a hand grenade.

“I’m a mother. I’m a wife.  I’m an American veteran, and I’m one of your middle-class Americans.  And quite frankly I’m exhausted.  I’m exhausted of defending you, defending your administration, defending the mantle of change that I voted for, and deeply disappointed with where we are.”  She said, “The financial recession has taken an enormous toll on my family.”  She said, “My husband and I have joked for years that we thought we were well beyond the hot-dogs-and-beans era of our lives.  But, quite frankly, it is starting to knock on our door and ring true that that might be where we are headed.”

The President experienced another “Velma Moment” on Monday.  This time, it was Maureen Dowd who had some fun describing the confrontation:

After assuring Obama that she was a supporter, an Iowa mother named Emily asked the president at a town hall at the Seed Savers Exchange in Decorah what had gone wrong.

*   *   *

“So when you ran for office you built a tremendous amount of trust with the American people, that you seemed like someone who wouldn’t move the bar on us,” she said.  “And it seems, especially in the last year, as if your negotiating tactics have sort of cut away at that trust by compromising some key principles that we believed in, like repealing the tax cut, not fighting harder for single-payer.  Even Social Security and Medicare seemed on the line when we were dealing with the debt ceiling.  So I’m just curious, moving forward, what prevents you from taking a harder negotiating stance, being that it seems that the Republicans are taking a really hard stance?”

President Obama can no longer blame the Republicans and Fox News for his poor approval ratings.  He has become his own worst enemy.  As for what Obama has been doing wrong – the title of Andrew Malcolm’s recent piece for the Los Angeles Times summed it up quite well:  “On Day 938 of his presidency, Obama says he’ll have a jobs plan in a month or so”.

Lydia Saad of the Gallup Organization provided this report on the President’s most recent approval ratings:

A new low of 26% of Americans approve of President Barack Obama’s handling of the economy, down 11 percentage points since Gallup last measured it in mid-May and well below his previous low of 35% in November 2010.

Obama earns similarly low approval for his handling of the federal budget deficit (24%) and creating jobs (29%).

*   *   *

President Obama’s approval rating has dwindled in recent weeks to the point that it is barely hugging the 40% line. Three months earlier, it approached or exceeded 50%.

The voters have finally caught on to the fact that Barack Obama’s foremost mission is to serve as a tool for Wall Street.  In Monday’s edition of The Washington Post, Zachary Goldfarb gave us a peek at Obama’s latest gift to the banksters:  a plan to provide a government guarantee of mortgage backed securities:

President Obama has directed a small team of advisers to develop a proposal that would keep the government playing a major role in the nation’s mortgage market, extending a federal loan subsidy for most home buyers, according to people familiar with the matter.

The administration’s reaction to curiosity about the plan was a tip-off that the whole thing stinks.  Mr. Goldfarb’s article included the official White House retort, which was based on the contention that the controversial proposal is just one of three options outlined earlier this year in an administration white paper concerning reform of the housing finance system:

“It is simply false that there has been a decision to move forward with any particular option,” said Matt Vogel, a White House spokesman.  “All three options remain under active consideration and we are deepening our analysis around how each would potentially be implemented.  No recommendation has been made to the president by his economic advisers.”

And if you believe that, you might be interested in buying some real estate located in  . . .

Zachary Goldfarb explained the plan:

Fannie, Freddie or other successor firms would charge a fee to mortgage lenders and banks and use the money to create an insurance pool to cover losses on mortgage securities caused by defaults on the underlying loans.  The government would be the last line of defense in case of another housing market meltdown, using taxpayer money to cover losses only if the insurance pool ran dry.

The Washington Post report inspired economist Dean Baker to expose the ugly truth about this scheme:

It would be difficult to find an economic rationale for this policy other than subsidizing the financial industry. The government can and does directly subsidize the purchase of homes through the mortgage interest deduction.  This can be made more generous and better targeted toward low and moderate income families by capping it and converting it into a tax credit (e.g. all homeowners can deduct 15 percent of the interest paid on mortgages of $300,000 or less from their taxes).

There is no obvious reason to have an additional subsidy through the system of mortgage finance.  Analysis by Mark Zandi showed that the subsidy provided by a government guarantee would largely translate into higher home prices.  This would leave monthly mortgage payments virtually unaffected.  The diversion of capital from elsewhere in the economy would mean slower economic growth and would kill jobs for auto workers, steel workers and other workers in the manufacturing sector.

For these reasons, if President Obama was really against big government and job killing measures, he would oppose this new scheme to subsidize mortgage securitization.  On the other hand, if the goal is to ensure high profits and big salaries for top executives in the financial sector, then a government subsidy for mortgage securitization is good policy.

Frustration with the inevitability that the 2012 Presidential Election will ultimately become a choice between two corporatists has inspired a movement to encourage a Democratic Primary challenge to Obama.  The organization – StopHoping.org – is based on this simple objective:

The majority of U.S. citizens favor protecting Social Security, Medicare, and Medicaid; taxing the rich; cutting military spending; and protecting the environment.  We don’t have a candidate . . . yet.  Potential candidates supported on this site will be notified and encouraged to run.

I hope they succeed!


 

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Disappointer-In-Chief

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April 9, 2009

President Obama must feel relieved by the cartoonish attacks against him by the likes of Rep. Michelle Bachmann and Fox News character, Sean Hannity.  Bachmann’s accusations that Obama is planning “re-education camps” for young people surely brought some comic relief to the new President.  Hannity must have caused some thunderous laughter in the White House with his claim that during a speech the President gave in Strasbourg, France, we saw examples of how “Obama attacks America”.  These denigration attempts were likely received as a welcome break from criticism being voiced by commentators who are usually supportive of the Obama administration.  Take Keith Olbermann for example.  He has not been holding back on expressing outrage over the Obama administration’s claim that the Patriot Act provides sovereign immunity to the federal government in civil lawsuits brought by victims of illegal wiretapping conducted by the Bush administration.  Another example of a disillusioned Obama supporter is MSNBC’s Rachel Maddow, who has been fretting over the President’s plan to up the stakes for success in Afghanistan by increasing our troop commitment there and settling in to fight the good fight for as long as it takes.

Nothing has broken the spirits of Obama supporters more than his administration’s latest bank bailout scheme —  a/k/a  the Public-Private Investment Program (PPIP or “pee-pip”).  Although Treasury Secretary “Turbo” Tim Geithner has been the guy selling this plan to Congress and the public, the “man behind the curtain” who likely hatched this scam is Larry Summers.  Summers is the economist whom Obama named director of the National Economic Council.  At the time of that appointment, many commentators expressed dismay, since Summers, as Bill Clinton’s Treasury Secretary, supported repeal of the 1933 Glass-Steagall Act.  It is widely accepted that the repeal of the Glass-Steagall Act helped bring about the subprime mortgage crisis and our current economic meltdown.  On the November 25, 2008 broadcast of the program, Democracy Now, author Naomi Klein made the following remark about Obama’s appointment of Summers:  “I think this is really troubling.”  She was right.  It was recently reported by Jeff Zeleny of The New York Times that Summers earned more than $5 million last year from the hedge fund, D. E. Shaw and collected $2.7 million in speaking fees from Wall Street companies that received government bailout money.  Many economists are now voicing opinions that the Geithner-Summers Public-Private Investment Program (PPIP) is “really troubling”, as well.  Nobel laureates Paul Krugman and Joseph Stiglitz have been vocal critics of this plan.  As James Quinn reported for London’s Telegraph:  Professor Stiglitz said that the plan is “very flawed” and “amounts to robbery of the American people.”

Obama supporter George Soros, the billionaire financier and hedge fund manager, had this to say to Saijel Kishan and Kathleen Hays of Bloomberg News about Obama’s performance so far:

“He’s done very well in every area, except in dealing with the recapitalization of the banks and the restructuring of the mortgage market,” said Soros, who has published an updated paperback version of his book “The New Paradigm for Financial Markets:  The Credit Crisis of 2008 and What It Means” (Scribe Publications, 2009).  “Unfortunately, there’s just a little bit too much continuity with the previous administration.”

The usually Obama-friendly Huffington Post has run a number of critical pieces addressing the Geithner – Summers plan.  Sam Stein pointed out how the plan is “facing a new round of withering criticism from economists”:

These critiques have produced a Washington rarity:  the re-sparking of a debate that, in the wake of positive reviews from Wall Street, had largely subsided.  Just as Geithner seemed to be finding his political footing, the spotlight has been placed right back on his cornerstone proposal, with critics calling into question both his projections and past testimony on the matter.

Jeffrey Sachs, an Economics professor at Columbia University, wrote a follow-up article for The Huffington Post on April 8, affirming earlier criticisms leveled against the bailout proposal with the added realization that “the situation is even potentially more disastrous” than previously described:

Insiders can easily game the system created by Geithner and Summers to cost up to a trillion dollars or more to the taxpayers.

Zachary Goldfarb of The Washington Post took a closer look at Treasury Secretary Geithner’s testimony before Congress last month, to ascertain the viability of some of the proposals Geithner mentioned at that hearing:

The Obama administration’s plan for a sweeping expansion of financial regulations could have unintended consequences that increase the very hazards that these changes are meant to prevent.

Financial experts say the perception that the government will backstop certain losses will actually encourage some firms to take on even greater risks and grow perilously large.  While some financial instruments will come under tighter control, others will remain only loosely regulated, creating what some experts say are new loopholes.  Still others say the regulation could drive money into questionable investments, shadowy new markets and lightly regulated corners of the globe.

If President Obama does not change course and deviate from the Geithner-Summers plan before it’s too late, his legacy will be a ten-year recession rather than a two year recession without the PPIP.  Worse yet, the toughest criticism and the most pressure against his administration are coming from people he has considered his supporters.  At least he has the people at Fox News to provide some laughable “decoy” reports to keep his hard-core adversaries otherwise occupied.

Here We Go Again

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September 22, 2008

Exactly one year ago, we saw the release of Naomi Klein’s book, The Shock Doctrine: The Rise of Disaster Capitalism.  Klein’s book explained how unpopular laws were enacted in a number of countries around the world, as a result of shock from disasters or upheavals.  She went on to suggest that some of these events were deliberately orchestrated with the intent of passing repugnant laws in the wake of crisis.  She made an analogy to shock therapy, wherein the patient’s mind is electrically reformatted to become a “blank slate”.  Klein described how advocates of “the shock doctrine” seek a cataclysmic destruction of economic order to create their own “blank slate” upon which to create their vision of a “free market economy”.   She described the 2003 Iraq war as the most thorough utilization of the shock doctrine in history.  Remember that this book was released a year before the crisis we are going through now.

You may recall former Senator Phil Gramm’s recent appearance in the news for calling the United States a “nation of whiners” and positing that the only recession going on in the United States these days is a “mental recession”.  Gramm is a longtime buddy and mentor to a certain individual named John McCain.  Gramm is the architect of the so called “Enron Loophole” allowing speculators to drive the price of oil to absurd heights.  (Gramm’s wife, Wendy, was a former member of Enron’s Board of Directors.)  Gramm was most notorious for his successes in the deregulation of Wall Street (with the help of McCain) that facilitated the “mortgage crisis” as well as the current economic meltdown.  He sponsored the 1999 bill that repealed the Glass-Steagall Act.  The repeal of that law allowed “commercial” and “investment” banks to consolidate.  Gramm’s face appears in many campaign videos with McCain, taken earlier this year.  As a result of the outrage generated by Gramm’s remarks, McCain formally dismissed Gramm as his campaign’s economic advisor.  Despite the fact that Gramm no longer has a formal role in the McCain campaign, many believe that he would be McCain’s choice for Secretary of the Treasury in the event that McCain should win the Presidential election.  On September 21, MSNBC’s David Shuster grilled McCain campaign spokesman, Tucker Bounds, about the possibility that McCain is planning to appoint Phil Gramm as his Secretary of the Treasury, should McCain win.  Tucker Bounds squirmed all over the place, employing his usual tactic of deflecting the subject of the current economic crisis back to the Obama campaign.  Most noticeably, Mr. Bounds never made any attempt to deny that McCain plans to put Gramm in charge of the Treasury.

Our current Treasury Secretary, Henry Paulson, is on the covers of this week’s newsmagazines, pushing for uncritical acceptance of his (and hence, the Bush Administration’s) solution to the current economic crisis.  This basically amounts to a three-page “bailout” plan for banks and other financial intuitions holding mortgages of questionable value, at a price to the taxpayers of anywhere from $700 billion to One Trillion Dollars.  The Democrats are providing some “pushback” to this plan.  Barack Obama was quoted by Carrie Brown of Politico.com as saying that the Bush Administration has “offered a concept with a staggering price tag, not a plan”.  Obama went on to insist that the “American people must be assured that the deal reflects the basic principles of transparency, fairness and reform”.

As reported by Stephen Labaton in the September 21 New York Times, House Speaker Nancy Pelosi complained that:

… the administration’s proposal did “not include the necessary safeguards. Democrats believe a responsible solution should include independent oversight, protections for homeowners and constraints on excessive executive compensation.

Senator Chris Dodd of Connecticut was quoted in that article as saying:  “We need to offer some assurance to the American taxpayer that Congress is watching.”  Dodd went on to explain:

One of the things that got us into this mess was the lack of accountability and the lack of oversight that was occurring, and I don’t think we want to repeat those mistakes with a program of this magnitude.

The Times article then focused on the point emphasized by Republican Senator Arlen Specter:

I realize there is considerable pressure for the Congress to adjourn by the end of next week  . . .   But I think we must take the necessary time to conduct hearings, analyze the administration’s proposed legislation, and demonstrate to the American people that any response is thoughtful, thoroughly considered and appropriate.

Nevertheless, Treasury Secretary Paulson made the rounds of the Sunday talk shows to advocate pushing this bailout through quickly, without the safeguards and deliberation suggested by the Democrats and Senator Specter.  As Zachary Goldfarb reported in the September 21 Washington Post:

Paulson urged Congress not to load up the legislation with controversial provisions. “We need this to be clean and quick,” he said.

“Clean and quick”  . . .   Is that anything like “Shock and Awe”?  As usual, there is concern about whether Congressional Democrats will have the spine to resist the “full court press” by the Bush Administration to get this plan approved by Congress and on the President’s desk for signature.  As Robert Kuttner reported in The Huffington Post:

One senior Congressional Democrat told me, “They have a gun to our heads.” Paulson behaved as if he held all the cards, but in fact the Democrats have a lot of cards, too. The question is whether they have the nerve to challenge major flaws in Paulson’s plan as a condition of enacting it.

Here we go again.  Will the Democrats “grow a pair” in time to prevent “the shock doctrine” from being implemented once again?  If not, will we eventually see the day when Treasury Secretary Phil Gramm basks in glory, while presiding over his own manifestation of economic utopia?