Sallie Krawcheck will bring Wall Street work culture to the SEC

Sallie Krawcheck of Bank of America, being shopped around DC for head of the SEC

Yesterday, I read a post by DDay on Firedoglake about how the totally uneccessary “fiscal cliff” talks are going and I felt a tiny, teensy ember of hopefulness.  But it was quickly dashed when I read in the NYTimes about how the Obama administration is considering Wall Street executive Sallie Krawcheck for the head of the Securities and Exchange Commission.

Never turn your back on the Obama administration or its backers.

It’s not just the fact that Krawcheck is a Wall Street executive who will be regulating one of the worst bunch of cheaters, liars and thieves in the history of the world. It’s more about the other things she brings to the table that the movers and shakers think are important.  For example, she is “known for her independent streak and consumer advocacy efforts”.  I don’t know what that means and the New York Times does not go into details.  Does her independence extend to not calling consumers of Wall Street products “muppets”?  I guess that would be a step in the right direction.  But something about the vagueness of this sentence reminds me of the slick, tailored dude from the major 401K management firm who I will not name who came to our site to describe all the new financial products they were rolling out.  He gave his presentation to a bunch of sciencey types but the numbers on the brochures were all based on estimates of salaries and 401K balances of the executives up the street.  Then he went on to say that these were our choices, there are no guarantees we’ll make any money from any of them, but, hey, where’re you going to go?  There’s not going to be any Social Security.  (Oh, yes, he really did say that.  I kept wondering where he was getting his information in 2009)

So, that’s the first thing that bothers me.  Making the financial products easier to understand and transparent for the consumer doesn’t get rid of their risks.  It doesn’t give you something solid and guaranteed to fall back on like Social Security.  And if everyone on Wall Street is offering products where the House is guaranteed to win no matter what but where consumers could lose everything they have because there are no company pensions anymore and we’re all shoved into 401Ks against our better judgements, then consumer advocacy means very little.  I don’t like the premise to start with that we all have to be playing at the global craps table.  Some of us want other, more secure, boring, plodding choices.  No, we really don’t care if we never own our own yacht.

But it’s more than that.  It’s Krawcheck’s crappy attitude towards work that is characteristic of Wall Street culture as described by anthropologist  Karen Ho in her book Liquidated, An Ethnography of Wall Street.  Here’s what Krawcheck had to say:

One [LinkdIn] recent dispatch, titled “What I Learned When I Got Fired (The First Time),” offered career guidance from her own rocky periods.

“If you haven’t been fired at least once, you’re not trying hard enough,” she wrote. “As the pace of change in business increases, the chances of having a placid career are receding. And if in this period of rapid change, you’re not making some notable mistakes along the way, you’re certainly not taking enough business and career chances.”

This is where she becomes completely unacceptable.  Here’s the problem: she acts like a “placid career” is a bad thing and a thing of the past.  (How does she know that?? What information does she have that we don’t? What schemes have the bankers been up to?)  Well, it might be a bad thing for people who suffer from ADHD and pernicious greed well into their adulthoods but to the rest of us out here, our placid careers are what makes us consumers in the first place.  You can’t buy anything if you don’t know where your next paycheck is coming from.  I have seen this attitude creep into the pharmaceutical research industry and ruin it.  Around 2000, many of the pharmas started employing Jack Welch management and rewards systems on the research community.  But Welch was trying to motivate salesmen.  His method doesn’t work in science.  Research people are about as far away from sales people in temperament as it is possible to get.  But suddenly, we were all supposed to act like salesmen, become super competitive and cutthroat and be prepared to lose our jobs at any moment.  You can’t do science under those circumstances.  Research takes continuity and patience and collaboration.

I’m pretty sure that science is not the only industry that doesn’t adapt well to the Wall Street work style where everyone is ready at any moment to be laid off.  It’s not practical for hundreds of millions of Americans to become instant precariats.  For one thing, many Americans live paycheck to paycheck.  Challenging the status quo and getting fired isn’t an option for them, much less getting things wrong just for the sake of shaking things up.  For another, you can’t plan for the future if you’re always worried about your present.  It’s impossible to put down roots, buy a house or even rent one, purchase a new car or computer.  You can’t have a family.  Well, you *could* have one but you’d better be prepared to not see them.  That’s what has happened to a lot of ex-pharma people.  Their families live in one state while they work in another. Think of South African diamond miners in Soweto.  And no job is secure for very long, which makes relocation a constant problem.

That’s going to have a downstream effect on homeownership, the auto industry, consumer goods.  Has it ever occurred to people on Wall Street and the people from Wall Street who are now in the upper echelons of the Obama administration that this kind of attitude towards work may be prolonging the recession??

Oh, but Wall Street people will argue that it’s the survival of the smartest.  But the science researchers out here who have lost our jobs know this is bullshit.  What Wall Street values is status, not intelligence.  Spend a few months in a lab trying to discover something that no one has ever done before.  That’s intelligence.  Or do brain surgery or rocket science or green energy science.  Or try plumbing, or modern architecture with new materials.  Or fixing some young banker hotshot’s car.  There are many different professions that require intelligence.  Computational chemists have an inkling of what Wall Street professionals do because we work with complex mathematical models all the time.  Wall Street professionals *can* be replaced- easily.  It’s not so easy to replace someone who can interpret a new protein structure.  That takes practice.

And that’s another thing that flies out of the window in Krawcheck’s world.  In an environment where you can be fired for being bold and the safety net is weak to non-existent, no one is bold.  And with each firing, there’s less time to rehearse your skills.  You’re never on the job long enough to learn anything with proficiency.  There’s some study that says that to become truly proficient in an area, you need to have spent 10,000 hours practicing it.  In Krawcheck’s world, no one gets nearly that much time before the bean counters decide to subtract positions from the bottom line.  It’s even worse than that.  During Pharmageddon, it was the salesmen in the labs who survived the job cuts, not the people who actually did the work.  And there were plenty of people with excellent performance evaluations, merit awards and inventors of billion dollar block buster drugs who were let go.  One thing we science geeks have learned from Pharmageddon is that it doesn’t matter how hard you work, how long you work, how dedicated you are to your job or any other factor that you’ve been told is crucial to your employment.  You are expendable whenever the executives need your salary to pay a shareholder or buy a new company.  The relationship between effort and reward becomes permanently broken and no amount of mean spirited insistence from the conservative Tea Party whip kissers will change that.  Kissing the whip doesn’t do you any good any more, no matter what level of education or profession you have achieved.

So, to recap, Wall Street’s idyllic work environment would result in more economic uncertainty, more stress on families, less consumer spending, less long term thinking, less expertise for businesses and a poorer, more demoralized, less motivated workforce.  It sounds like something straight out of Central America circa 1980.

It’s hard to believe that someone like Sallie Krawcheck or anyone with her attitude towards work, would seriously be considered for any governmental position during this Little Depression that was caused by so much short term thinking.  I hope that the New York Times is just trying to be provocative.  Consider me provoked.

The problem with prospective appointments like Krawcheck’s to the SEC, like Tim Geithner’s to the Treasury department, is that they bring with them a moral attitude and values system towards work and reward that is dangerous to the average American.

But the morality and values starts at the top.  I doubt that Krawcheck and Geithner would even be considered by a president who was thinking about the long term interests of the average American.  And that’s what worries me and snuffs out that little teensy ember of hope.  Obama’s actions have to match his rhetoric and just by considering someone like Krawcheck or anyone like her, the actions and rhetoric will be miles apart.

Trust no one.

Update: In a followup post at the NYTimes titled Dropping the Ball on Financial Regulation, Simon Johnson of Baseline Scenario has similar misgivings about the Obama administrations prospective appointments, particularly with respect to Sallie Krawcheck to the SEC.

Message to Democrats: Don’t mess with us

I’m not sure that Democrats are getting the message.  They still think there is no place for us to go.  It’s either them or Republicans and we know that the Republicans are morally bankrupt.  Lately, we’ve seen that moral bankruptcy extends to the other party as well.  Two recent communiques stand out for me in this respect.

First, take this post, Does the Obama Administration Even Want to Win in November? , from Simon Johnson as proof that the Democrats just don’t give a f^&*.  Simon says:

There’s no story in the culture about what the big banks did and why. There is no attempt from the top to push through the key message for the day — financial reform — and to explain what this can do and how. The administration, in effect, is not even trying.

The inner team apparently thinks that 2012 will go just fine — as long as unemployment is down around 6 percent. And, they reason, the people who lose their seats this November won’t be around to complain.

Really?

If the administration fights hard and loses in November, that is one thing. If it fights on clear issues — forcing the other side to support Too Big To Fail structures — they may still lose, but such a loss will clearly communicate that the political strength of the big banks is now out of control. That is an issue to run on — and win big – -in 2012.

And if the administration doesn’t even care and hardly tries now, who will come out for them (or send a check) in two years?

The Obama team — both political and economic wings — seems to feel that their base has nowhere else to go, and all they need to do is drift towards the right in a moderately confused fashion to assure re-election for the president.

In short, the Obama administration is betting that you will be too desperate to salvage what little safety net is left after the GOP retakes control of Congress in 2010 that you will vote for Obama in 2012.  That’s what they’re betting on.  You will be so strapped, penniless and depleted of your retirement savings that you will automatically vote for Obama as a defense mechanism.  Who knows?  Maybe in September of 2012, we can expect the stock market to take another dizzying plunge, just to rattle everyones’ cages a bit.  Won’t that be fun?

Is that the Hope and Change that Obots voted for or does that sound like the machinations the oligarchy of some third world nation?

The second message is more disturbing considering its source.  I love Al Franken.  Everyone knows I do.  And I would walk over hot coals to vote for him if I were a Minnesotan.  But I really did not like the email I got from him on the Health Care Reform bill.  He is urging us to put pressure on House members to vote for the Senate bill with reassurances that it will be fixed later in reconciliation.  Al, there’s only one thing that Reagan ever said that I took to heart: “Trust, but verify”.  Any smart progressive or liberal would have to be nuts to believe that there will be a successful reconciliation *AFTER* the Senate bill passes in its present form.  I don’t want to know about secret deals or 11 dimensional chess or any other supposed secret plan to scuttle the Republicans.  I want you guys to act like Democrats.  If the House members vote for the Senate bill as is, they’re signing their political death warrants with the base.  The Senate bill violates core Democratic principles and so does many elements of the House for that matter.

So, let me deliver a message from the base to the Democrats.  Here are the things we want to see you guys get your asses in gear to do before November 2010.  And remember, there are just enough of us marginal voters out there to really harsh your electoral mellow going forward.  Just keep Corzine and Martha Coakley in mind.  We don’t have to vote.  If you want to stay in power, you need to start kissing up to us and fast.  And just forget about our support for Obama in 2012.  Nothing could make us vote for him now that he’s proven to be the empty suit, opportunist that we predicted he’d be.  If you don’t want a Republican in the White House, you’d better start working on the Obama problem now.

Here’s the CHANGE we want in very simple, straightfoward terms:

• NO MANDATES WITHOUT REAL COMPETITION in the health care insurance market.  For EVERYONE.  That means strengthening antitrust legislation and allowing everyone who has a policy to go shopping for a better one with a standard benefits package. We’ll know it when we see it.  So far, we haven’t seen it.  Don’t expect support until this requirement is met.  You may have to piss off Max Baucus.  That is fine with us.
• We want you to SOAK THE RICH.  This is what you were elected to do.  You may have thought you were just riding the coattails of the first black president phenomenon but that’s not true.  The CHANGE we wanted was protection of the middle class against the rape and pillagers who had Bush’s ear for 8 years.  Go back to the Clinton tax levels for everyone.  Claim a national emergency.  Put in a sunset provision for 2020. Dump the excise tax or pay for it with your seats.
• We want you to SOAK THE RICH when it comes to the financial industry.  Get the bonus money back.
• We want you to SUPPORT GENDER EQUALITY.  No more deals with Stupak.  Draw a line in the sand with him and then dare him to cross it.  Don’t give him money to run in November.  Make HIM the poster child of bad behavior.  If you don’t, your party can never again use protecting reproductive rights as an incentive for any woman to vote for you.  Your credibility will be permanently shot.  No, this is not negotiable.  No one will ever believe you again.  It’s up to you.  There are a lot of American female voters out there.  You gotta ask yourself, “Do I feel lucky today?”
• We want you to SAVE AMERICAN JOBS.  Figure out a way to keep the TARP money from going overseas to speculate in emerging markets.  That’s our money and we shouldn’t be betting against ourselves.
• DON’T TOUCH SOCIAL SECURITY.  Some of us have been paying the extra payroll tax all of our working lives.  That’s our insurance policy, we’ve paid for it and we have every expectation that it will be paid to us as advertised.  No, don’t even go there.  We aren’t buying it.  You depleted the trust fund?  You figure out how to get that money back.  See SOAK THE RICH above.

If you don’t start playing the game by our rules, you’ll be out on your asses before you know what hit you.  This is the age of mass communications and viral memes and social networking.  Your ability to fool enough of the people most of the time is going to lose it’s mojo pretty soon.  Cable news audiences are going away.  More and more people are looking at the wreckage of their middle class lives and they’re not buying the propaganda you’re catapulting anymore.  They’re starting to trust their lying eyes.  All you need is one good movement to catch fire.  It ain’t the Tea Party movement.

You will be surprised what people can do from the comfort of their own homes.  A protest doesn’t require hordes of people marching in the streets carrying banners and shouting slogans.  Self organizing is remarkably easy to do without the sting of tear gas or police batons.  It can be quick and painless.  Just because it’s quiet out there now doesn’t mean that the atmosphere isn’t charged.  Depending on the energy behind the movement, the pendulum may swing a lot farther than you anticipate.

If you have any sense of political self-preservation, you won’t test us.

Thursday Morning News: Summertime, summertime, sum-sum-summertime

At this time next week, I will be lolling on a beach in Maui.  Ahhhhh.   I can hardly wait to get out of the stifling humidity of NJ, a humidity I haven’t been able to escape now that my AC is kaput and I am determined to ride out the rest of the summer without it.  (Well, that plus the fact that a replacement is supposed to cost me nearly $6000 for my modest townhouse.  Does that number seem high?)  The AC went out after the plane tickets were bought so Maui it is and I do not regret it.  If the pictures are accurate, here’s where I’ll be having breakfast next Thursday.

Yeah.

On to the news:

Corzine is still trailing Christie in the race for New Jersey’s governor.  It doesn’t look like Corzine has closed the gap much.  Christie leads by 12+%  The DailyKos poll has him leading by only 8%. which is the most optimistic poll.  With DailyKos polling only the Obama supporters who are men between the ages of 14-30, with jobs in the finance industry who have posters of Jon Favreau on the walls of their bedrooms in their mom’s house, that’s still not good news for Corzine.  Ya’know, you can’t blame this on racism, not that the Kossacks won’t try. Hmmm, maybe Corzine should have tried harder to be a good Democratic governor instead of a DINO placeholder.  Oh, well!  Too late to cram for it now.

Simon Johnson at baselinescenario is following the Fed’s claims that it can protect consumers better than a new Consumer Protection agency of the type that Elizabeth Warren favors.  Johnson’s not buying it.  It’s not part of the Fed’s scope or mandate and it doesn’t work in the Fed’s favor.   Part of an ongoing series of arguments that are not to me missed.

Alegre points to a piece by Peter Daou on the Overton Window at The Huffington Post.  I can’t disagree with anything in Daou’s piece but I think what is getting overlooked is the reason that Obama started in the center and worked his way right.  I think this was part of the design in electing Obama in the first place.  The establishment press loved him because they knew he would be weak and beholden to them for getting him into office in the first place.  It explains why Michelle has been deep-sixed on the political stage and relegated to a Republican First Lady style public role.  It’s to keep the press at bay.  So much for feminism in the White House.  Obama’s reluctance to start left and negotiate from there indicates a fear of the press, who would have savaged him on the health care issue.  So far, the media is supporting his plan, with the exception of the Limbaughs and other right wingers.  That worries me because the establishment media doesn’t like change.  Obama could have used his political capital and his majorities in both houses to come out of the inauguration like gangbusters and take everyone by surprise with a well constructed universal health care plan that would cut out the middle men.  That didn’t happen and I don’t think it was just fear of the media that prevented him from doing it.

But what is preventing Obama from doing it?  I keep reading “faith based” musings from Democrats and liberals who assume that Obama has some greater purpose that he isn’t telling us yet.  Like this one from Robin Wells:

Joking aside, I have this fervent belief that Obama has somewhere, deep down in his pockets, the keys to escape.

Or this one from Michael Moore:

I take all of the things that make me nervous about the decisions that Obama has made, and I look and them through that lens – that it’s some kind of master plan. It’s like his continued support of a government-run option for health care. If a true public option is enacted – and Obama knows this – it will eventually bring about a single-payer system, because the profit-making insurance companies won’t be able to compete with a government plan and make the profits they want to make. At some point most of them will probably have to bow out of the business.

It sort of reminds me of Saint Paul telling us that we see through a glass darkly but soon all will be made clear.  Surely, the judgment day is coming when Obama will return and smite his enemies and usher in an era of liberal paradise.  We cannot know the day or the hour.  But it’s coming.  We mere mortals shouldn’t question his ways of Obama.  Um, this is creepy.  I even see Paul Krugman almost slipping into this mindset.  But the signs do not point to an Armageddon followed by 1000 years of New Deal-Great Society 2.0.  Can we just put away the glazed out expressions and deal with reality here?  Obama is not a god and we don’t have to make burnt offerings and read the smoke to figure out what he wants.  There is no such thing as 11 dimensional chess.  He’s just not a very strong or progressive president and he’s not going to save the day.  Period.

And here’s a cold dose of reality from the New York Times for the believers.  In Obama Injects Himself Into Health Care Talks, the veil is pulled back to show that Obama already cut deals for undermining the public option back in the spring:

In pursuing his proposed overhaul of the health care system, President Obama has consistently presented himself as aloof from the legislative fray, merely offering broad principles. Prominent among them is the creation of a strong, government-run insurance plan to compete with private insurers and press for lower costs.

Behind the scenes, however, Mr. Obama and his advisers have been quite active, sometimes negotiating deals with a degree of cold-eyed political realism potentially at odds with the president’s rhetoric.

Last month, for example, hospital officials were poised to appear at the White House to announce a deal limiting their industry’s share of the costs of the overhaul proposal when a wave of jitters swept through the group. Senator Max Baucus, the Finance Committee chairman and a party to the deal, had abruptly pulled out of the event. Was he backing away from his end of the deal?

Not to worry, Jim Messina, deputy White House chief of staff, told the lobbyists, according to White House officials and lobbyists briefed on the call. The White House was standing behind the deal, Mr. Messina said, capping the industry’s costs at a maximum of $155 billion over 10 years in trade for its political support.

Some Democrats and industry lobbyists now argue that, in negotiating deals through Mr. Baucus’s panel with powerful health care interests, the White House was tacitly signaling as early as last spring that it might end up accepting something more modest than the government insurer the president has said he prefers.

The Rapture ain’t coming.

I don’t like to dwell on the trivial and distracting but here are two takes on Hillary’s (quite understandable) retort to a student journalist in Africa who asked whether she deferred to the Big Dawg while doing her job.  Suzanne Goldenberg of The Guardian thinks Clinton is due some respect for the job she has taken on and gets no credit for.  Tina Brown, that middle aged mean girl at The Daily Beast writes the most loathesome piece of tripe I’ve read since Sally Quinn told Hillary to take some time off after the primaries and visit an ashram or something to get her moral bearings.  (Wasn’t Sally Quinn the woman who ended her husband’s first marriage with an affair?  Someone remind me.)  One can almost imagine MoDo, Quinn and Brown doing lunch and plotting their next nasty knifing of a powerful woman.  What exactly is their problem with powerful women anyway?  Is it that nastiness is the only power they possess?  Ok, I’ve given these people waaay too much time.  Moving on…

Yes, that’s Tina Fey playing teacher.

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Saturday: This song is for you, Simon Johnson

Simon Johnson, former chief economist of the IMF, professor at MIT and blogger at baseline scenario and WaPo’s The Hearing, has written another excellent post on the financial industry’s walking dead.  In Zombie Oligarchs, Simon lays out why these guys, interested in self-preservation only,  just continue to feed but don’t improve entrepreuneurship in the world:

Some new entry and productive reallocation of talent is possible in this situation.  For example, John Mack is saying that pay caps mean his bankers are leaving – among other things – for “other industries”.  But the G20 policy of stabilization-through-rollover, at the national and corporate level, means that incumbents’ implicit subsidies actually go up.  The environment for starting businesses in the US has not completely collapsed, but it has also definitely not improved.

So we get to keep many of our oligarchs, but relative to the recent past they will hunker down.  You might be fine with that – although remember that it does not prevent reckless risk-taking and an increase in your taxes down the road.  Larry Summers says this happens only twice per century, but his own argument is that we have moved away from the kind of financial system that was built in the mid-20^th century.  If we’ve gone back to the wilder days of the 19^th century, the cycles could be quite different (look at the NBER’s data).  If the US has really become more like an emerging-market-with-a-reserve-currency, that is also not encouraging.

We’re looking at a near term dominated by the existing economic power structure.  The remaining big banks (in the US) and big banks/corporates (elsewhere) are made invincible by campaign contributions, political connections, and everyone’s reasonable fear of a great depression.  It will be hard for outsiders to challenge that structure effectively – either as new companies or with new ideas.  But you won’t see a great deal of innovation, investment, and growth coming from these survivors.

In light of current events, I think this song is very timely.  This one’s for you Tom, er, Simon.

Friday: Simon Johnson on Bill Moyers Journal tonight

He will be discussing the Pecora commission that Nancy Pelosi is advocating:

Bill Moyers asked me to join his conversation this week with Michael Perino – a law professor and expert on securities law – who is working on a detailed history of the 1932-33 “Pecora Hearings,” which uncovered wrongdoing on Wall Street and laid the foundation for major legislation that reformed banking and the stock market.

My role was to talk about potential parallels betweeen the situation in the early 1930s and today, and together we argued out whether the Pecora Hearings could or should be considered a model for today.

Bill has a great sense of timing.  On Wednesday night the Senate passed, by a vote of 92-4, a measure that would create an independent commission to investigate the causes of our current economic crisis; we taped our discussion on Thursday morning.

I don’t know much about the Pecora commission but the Federal Reserve has an archive of the hearings and you can read all about it here.  It looks intimidating but no one should feel compelled to stay up all night cramming.  Take your time.  Simon is also soliticing solutions to the banking crisis at his new blog, The Hearing at WaPo.  It sounds like a very good idea.  The only thing I take issue with is the stab he takes at populism in his brief post.  It seems to me that the populace is asked to sit on its hands an awful lot.  We are supposed to take the anger and passion out of every interaction.  As a result, Congress doesn’t feel the bite and thinks it can get away with doing less than it should.  This is wrong.  It’s fine and dandy to ask for civilized discussion on a blog that is requesting real suggesions, not f-bombs and insults.  But it is quite another thing to ask people to stop protesting and contacting their Congressional Rep to vent their anger at the passivity of our elected officials during a time of crisis.  After all, if we don’t stick up for ourselves, no one else is going to do it.

Simon may be inadvertently feeding the “learned helplessness” that we have discussed before.  If an animal feels that it is under stress but that nothing it does makes any difference to relieve that stress, it may stop trying.  Therefore, Mr. Johnson, verily I say unto you, do not stand in the way of populism.  If you want real action on the Pecora commission initiative, you’ll be more likely to get it if there are more people on your side screaming bloody murder for it.  You don’t have to encourage the screaming.  Just don’t condemn it.  People are right to be angry.  Let’s just make sure it gets directed, in an undiluted state, towards the right people.  Our elected officials need to feel their jobs are at stake before they do something and nothing will get their attention better than an angry and persistent constituency.

Channel that populist rage onto Congress, whose job it is and was to keep the greedy, selfish finance crowd on a shorter leash. Otherwise, the public might as well be a flock of sheep.

(Simon recently gave another interview to Andrew Leonard at Salon.  Oddly enough, he’s citing the French Revolution in this one.  You’ve got to wonder why the Sans-culottes were good enough for the French but not for us…)

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In other news:

What do health care, Kathleen Sebelius, the GM restructuring (now featuring *more* bankers!) and Al Franken have in common?  There are filibusters threatened by the Republicans in Congress on virtually every issue of importance from health care to abortion to holding bankers accountable and the Democrats need 60 votes to put an end to such threats.  Al Franken was elected Minnesota’s next Senator.  He won the seat by something like 300 votes.  A three judge panel has declared him the winner and all that is left is for Governor Tim Pawlenty to sign the election certificate to make it so.  Norm Coleman has vowed to take his case all the way to the US Supreme Court if he has to and he probably will, meaning that this election could remain unresolved until the fall. Franken would be the 59th senator.

Now, you may not be crazy about Franken.  His position on the war was wrong but he quickly snapped out of that.  He’s also ruffled a few feathers for his previous work as a really funny guy, sometimes at others’ expense.  But Franken is a true liberal and getting him to the Senate toot sweet would pretty much end the excuses that the Democrats have forwarded for their inaction.  Biden is the tie breaker.  Someone with knowledge of Senate procedure can tell us whether Biden can break the tie on a cloture vote.  I’m willing to give Franken a try and the sooner the better.  The Republicans are no doubt throwing every roadblock they can to keep him from getting there.  Their ability to obstruct would be reduced by one and assuming that Harry Reid is willing or interested in holding his coalition together with some discipline, that one vote could make a big difference.  Franken is taking donations for his protracted and expensive election fight.  You can give here.

finally…

WOOT!  We are going to hit 6 million hits today since we opened this gin joint last year.  Par-tay!

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Thursday: High Noon at the Banker Corral

Simon Johnson is saying we’re headed for a showdown with the bankers. The forbearance strategy that Obama is using is going to prolong the problem and cost us a lot more money in the form of much higher taxes if Treasury does not force the bankers to back down. Incredibly, the finance industry, especially Goldman-Sachs, is making the situation worse:

In the case of Goldman, the explicit intention is to pay back TARP funds and to escape all government-imposed limitations on compensation. This would obviously be good for Goldman and the people who run it. Anything that strengthens their advantage over competitors and increases market share will presumably raise their profits and compensation, making it easier to attract even more good people.
Such developments would worsen the business prospects of other large banks and potentially threaten their financial situation. The government’s forbearance strategy is fragile unless big banks do as the supervisors tell them. But Goldman and other major players apparently think they have so much political power- and this may be more about connections on Capitol Hill than links with the administration- that they can ignore the supervisors.

Go read the whole thing. Goldman is playing a global game of Monopoly with the potential for devastating consequences for all of us. Now that I think of it, didn’t Hank Paulsen hate Lehman Brothers? And wasn’t he the former CEO of Goldman? Is bankruptcy the way G-S is eliminating their competition? Something strange and unsavory is going on with G-S and the other banks that feels like out of control aggressive avarice.
And who are the people on Capitol Hill who refuse to put a stop to it all? Frank? Dodd?
Johnson says there’s no time like the present to engage the Department of Justice to enforce and prosecute antitrust laws. So, who is standing in the way of a showdown?

Friday: Tunnel Vision

Just when you thought it couldn’t get any worse with the banking system, we have a *new* concept to grapple with and this one should make you want to sharpen your pitchfork.  It’s called “tunneling”.  In short, tunneling occurs when bankers on the brink of insolvency are kept afloat just long enough for them to hide the good assets while they leave the bad assets for the government to absorb at taxpayer expense.  Isn’t that fun?  You can read all about it at NakedCapitalism.  And our administration’s resident genius, Tim Geithner, has set up conditions in a way that seem to be perfect for just this sort of thing.

Simon Johnson of Baseline Scenario explains what is going on:

Emerging market crises are marked by an increase in tunneling – i.e., borderline legal/illegal smuggling of value out of businesses…

Boris Fyodorov, the late Russian Minister of Finance who struggled for many years against corruption and the abuse of authority, could be blunt. Confusion helps the powerful, he argued. When there are complicated government bailout schemes, multiple exchange rates, or high inflation, it is very hard to keep track of market prices and to protect the value of firms. The result, if taken to an extreme, is looting: the collapse of banks, industrial firms, and other entities because the insiders take the money (or other valuables) and run.

This is the prospect now faced by the United States.

Treasury has made it clear that they will proceed with a “mix-and-match” strategy, as advertized. And people close to the Administration tell me things along the lines of ”it will be messy” and “there is no alternative.” The people involved are convinced – and hold this almost as an unshakeable ideology – that this is the only way to bring private capital into banks.

This attempt to protect shareholders and insiders in large banks is misguided. Not only have these shareholders already been almost completely wiped out by the actions and inactions of the executives and boards in these banks (why haven’t these boards resigned?), but the government’s policy is creating toxic financial institutions that no one wants to touch either with equity investments or – increasingly – further credit.

Policy confusion is rampant. Did the government effectively sort-of nationalize Citigroup last Thursday when it said Vikram Pandit will stay on as CEO? If that wasn’t a nationalization moment (i.e., an assertion that the government is now the dominant shareholder), what legal authority does the Treasury have to decide who is and is not running a private company?

Will debtholders be forced to take losses and, if so, how much and for whom? As part of last week’s Citigroup deal, preferred shareholders – whose claims had debt-like characteristics – were pressed into converting to common stock. You may or may not like forced debt-for-equity swaps, but be aware of what the prospect of these will do to the credit market. Junior subordinated Citigroup debt (securities underlying enhanced trust preferred shares) were yesterday yielding 26%….

What do rapidly widening credit default spreads for nonbank financial entities (such as GE Capital and many insurance companies) signify? Is it something about expected behavior by the insiders or by government, or by some combination of both?

Confusion in policy breeds disorder in companies, and disorder leads to the loss of value. This is the reality of severe crises wherever they unfold; we have not yet reached the worst moment. And, of course, there are many more shocks heading our way – mostly from Europe, but also potentially from Asia.

The course of policy is set. For at least the next 18 months, we know what to expect on the banking front. Now Treasury is committed, the leadership in this area will not deviate from a pro-insider policy for large banks; they are not interested in alternative approaches (I’ve asked). The result will be further destruction of the private credit system and more recourse to relatively nontransparent actions by the Federal Reserve, with all the risks that entails.

Read it and weep, Obots.  This is what you worked for.  Obama is in bed with these people.  They helped him buy off superdelegates and pay for massive amounts of advertising.  They helped him trash the reputation and career of a much better candidate.  They footed the bill for those stupid Greek Columns.   Our retirements are in jeopardy right now and the bankers are using the confusion to loot whatever’s left and stash the booty in an underground banking system.  It’s the finance version of the Shock Doctrine.  Before you know it, there won’t be anything of value left.

Paul Krugman is also alarmed by the “dithering” that is leading to more confusion and the possibility of acts of bad faith among bankers.  When Krugman starts to worry about the deficit, you know the situation has gotten out of control.  The administration keeps throwing money at the problem, hoping to kick start it to life.  But the administration seems to be adamant about protecting the bankers from taking their medicine:

Think of it this way: by using taxpayer funds to subsidize the prices of toxic waste, the administration would shower benefits on everyone who made the mistake of buying the stuff. Some of those benefits would trickle down to where they’re needed, shoring up the balance sheets of key financial institutions. But most of the benefit would go to people who don’t need or deserve to be rescued.

And this means that the government would have to lay out trillions of dollars to bring the financial system back to health, which would, in turn, both ensure a fierce public outcry and add to already serious concerns about the deficit. (Yes, even strong advocates of fiscal stimulus like yours truly worry about red ink.) Realistically, it’s just not going to happen.

So why has this zombie idea — it keeps being killed, but it keeps coming back — taken such a powerful grip? The answer, I fear, is that officials still aren’t willing to face the facts. They don’t want to face up to the dire state of major financial institutions because it’s very hard to rescue an essentially insolvent bank without, at least temporarily, taking it over. And temporary nationalization is still, apparently, considered unthinkable.

But this refusal to face the facts means, in practice, an absence of action. And I share the president’s fears: inaction could result in an economy that sputters along, not for months or years, but for a decade or more.

Um, I don’t think I can wait a decade or more to see *if* my 401K investments bounce back.  I want to see things returning to some kind of normal state pretty damn quick so I know that recovery is possible.  Now, I’m no financial wiz but I think we’ve all seen something like this happen before. Your computer starts to hiccup.  At first, it’s just a minor thing and you ignore it.  Then it happens again and again with greater frequency.  Before you know it, you’re opening and closing windows, relaunching programs and tinkering under the hood with network settings.  The last thing you try that you know you don’t want to have to do (because you’re not sure everything is saved) is a reboot.

It’s time to hit that power off switch.

Wednesday: I will gladly pay you Tuesday

The kid has AM detention (don’t ask), so I have to make this short.

Quick question:  What do the following American taxpayers have in common?

• GM auto workers
• middle class suburbanites
• state workers with pensions

Answer:  They all agreed to defer part of their employment compensation package for future retirement benefits in the form of healthcare, 401K savings and pensions and they are the ones who are seeing massive failures in all three future compensation mechanisms. 

We’ve heard a lot about how Americans don’t save enough and I think we all know people who spend money like there’s no tomorrow.  But what about the vast majority who *did* save for tomorrow by buying into the notion that the company or state or financial services provider was carefully stashing away money on our behalf?  We gave them our trust and our money and many of us, including yours truly, are paupers today.  I’ve just seen 12 years of savings wiped out in the blink of an eye.

The finance industry has a pretty sweet deal.  They had access to our savings for years now and they gambled it all away.  For the stupid wage slave out there (and let’s face it, that’s how they see us), there’s very little left from the promise of future rewards if we just defer our savings.  This is the result of deregulation. We gave them our money in good faith and there was no accoutability for what happened to it.  It was like giving your life savings to a gambling addict with no requirement that the money had to be returned, in full with interest, by the end of the night.  No penalties for failing to do so.  We were *encouraged* to do this.  My employer signed me up for the 401K plan the first day I started to work.

For the banking industry, the insurance companies, the shareholders, it’s all NOW, NOW, NOW!  For the rest of us, “take and old, cold tater and wait” and oh, by the way, all your taxes are belong to us.

They never meant to keep their promises and no one was going to make them.  This is the price we paid for deferral.

Recommendation: Simon Johnson of Baseline Scenario did an interview with Terry Gross recently on Fresh Air.  He says the banking industry is very powerful and says what we’ve all been thinking:  they bought Obama and he can’t say “No” to them.

Sunday: “They think we are chumps”

Frank Jones from Bloom County prophesies in 1988.

Bill Moyers is on my $#@% list for becoming a toe sucking Obamaphile last year but he’s had some good interviews lately.  Last week, he had Glenn Greenwald and Jay Rosen on who shook their fingers at the press for being in the pockets of the bipartisan baddies while not acknowledging their own role in electing Barack Obama.  It’s too soon to say whether they’ve had an epiphany and are just too embarrassed to admit it.  Then, last Friday, Moyers interviewed Simon Johnson of the Peterson Group, the same econ group that employs Japan’s lost decade expert Adam Posen.

Johnson pulled back the curtain on the Obama administration’s economic team.  In short, it it chock full of financial industry insiders.  He also shares a short clip of someone from JP Morgan who is discussing bonuses.  Essentially, they are just going to change the name from “bonuses” to “retention awards”.  See?  Doesn’t that sound better?  Those bankers and brokers are not getting bonuses.  Nooooo.  They are getting awards for staying on.  I mean, it’s obvious.  No one in their right mind would want to work in this poisonous environment so we have to reward these people for sticking it out.

Johnson also critiques Geithner’s baliout plan and specifically his speech.  He praises Geithner for recognizing that the bankers are at fault and should be ashamed of themselves.  But then Geithner delivers the equivalent of a slap on the wrist to the bankers by suggesting (because no one really knows what the plan is yet) that he isn’t going to nationalize the banks.  Nationalizing is such an unAmerican concept that no one wants to utter the word.  We are trapped by our own cultural mythology.  Or are we?  The fact is that nationalizing has the biggest downside to the people most culpable for the demise of the financial industry in the first place – the bankers.  But we can’t do it for fear that we will be commies.  How conveeeeeenient.

So, Geithner’s speech was the equivalent of Bloom County’s Frank Jones catching Oliver Wendell Jones, his genius hacker kid, zeroing out his electrcity bill at the utility company and then “grounding” him by telling him he can’t have any beets for dessert. Johnson suggests that the faux outrage plays well in Peoria but really, a “small evil group to which no one we know belongs”  has its grip firmly on the Obama Administration’s junk.  This oligarchy is going to make sure that nothing bad happens to the bankers, thus all but guaranteeing a Japan style lost decade for the rest of us.  Yes, they think we are chumps.

It doesn’t have to be this way.  Greenwald may be a former Obama chump himself, however lukewarm, but he’s right to be alarmed that the left has boxed itself into a corner.  It so bought into the Obamaphenomenon and so disabled its own leverage that it is incapable of exerting any power on Obama now.  It can’t hold Obama’s feet to the fire.

But *we* can.

And we must.  Because Social Security is now starting to get the attention of the “reformers”.  Those same people who had such incredible success with credit default swaps and collateralized debt obligations are looking around for another pool of money where they can practice their own version of voodoo with new and groovy “instruments”.  We don’t want that.

If the progressive blogosphere is now sober and alarmed, I have a proposition for it.  Now is the time when we put aside our differences.  We will try to turn the other cheek and put aside the fact that you guys acted like f%^*ing @$$holes towards us for the past year.  If you are fully alarmed and ready to do some real activism, it is time we had some REAL unity and coordinated our messages.  We can offer amnesty, so long as you acknowledge to yourselves that you were mislead about us.  There was a reason why the split was engineered in the party.  It is to keep us from getting enough critical mass to take the oligarchical bastards on.  The way back to power is to first admit that you were had.  You don’t have to do this publicly.  I’m sure you know what barriers to success you have to remove.

It is also time to face up to the fact that Obama is owned by the bankers.  That was the deal he struck with them.  They paid him mucho dinero to have a seat(s) at his cabinet table.  Saving the country and the taxpayers is the right thing to do.  I’ve been picking up on a narrative that says Americans are responsible for what happened by consuming too much and saving too little.  But there are also reports that Americans aren’t spending their way out of the recession like they should.  Let’s admit what this really is.  This is like Jerry Fallwell blaming the sinners of New Orleans for Katrina or like any endtime group blaming the culture for not being pious enough.  If you want rain, you have to not offend the gods.  If you’re facing catastrophe, you must have forgotten your burnt offerings.

I don’t like this narrative.  It’s like blaming the victim and as long as the “victim” feels guilty, he will accept his “punishment” because he will feel like he deserved it.  Oh sure, there are some people out there who spent more than they should have and gambled away their home equity or got over their heads in credit card debt. But there are many, MANY more people who did none of these things.  They contributed to their 401ks diligently and didn’t take on more debt than they should have and they are still going to have to suffer the consequences of the finance industry’s failures.   Wages have been essentially flat since the 70’s when adjusted for inflation even though the American worker has been more productive.  It’s time we started to put the blame where it belongs: on the people who created this system where you now need two jobs to support a family of four.  The bottom has fallen out of the social safety net.  Families are one paycheck away from insolvency through no fault of their own except that they have been snookered into voting for Republicans over and over again for the past 30 years.

So, if you Obots are getting alarmed, fighting this narrative is one of the first places to start.  The American taxpayer should not be forced to sacrifice anymore.  The American taxpayer has to stop being passive about the gods who are punishing them for their imaginary sins.  It is time that we stop paying for the mistakes of others.  If the banking and finance industry is in trouble for taking risks and leveraging themselves beyond all reason, it’s time that they paid for those transgressions and stopped foisting the bill onto the hapless  taxpayer.

Your job, if you choose to accept it, is to empower American taxpayers and inflame them with righteous indignation.  It’s time to tell them they are NOT chumps.  We didn’t all just fall off the turnip truck.  It’s time to help them understand what is happening because knowledge is power.  It’s time to pull back the curtain and point to the real culprits, even if you just helped to get them elected.

Are you with us?