Thursday, February 26, 2009

I'm No Economist...

But Paul Krugman is. And he had this to say about the team Obama has put together to deal with the economy: All the President’s Zombies. Nice title, eh? Pretty much sums it up, but Mr. Krugman does go on to explain:
Ben Bernanke’s testimony over the past two days gives us our best clue yet about where the administration and the Fed are going with bank rescue. And the answer seems to be … nowhere.

Simon Johnson and James Kwak
read it the same way I do:
This is another sign of the serious brainpower that has been expended on finding ways to avoid or minimise government ownership of banks, and to avoid the slightest possibility of offending shareholders – shareholders whose shares have positive value primarily because of the expectation of a further government bail-out.

And The Economist’s Free Exchange puts it bluntly:
At this stage, I joked, I’d be just as happy with them just saying, “We have a strategy, we will continue to inject capital to prop up zombie banks indefinitely. That’s pretty much the whole plan and we’re counting on it bringing the financial sector back to life someday, somehow”. Is it just me or is that pretty much what Ben Bernanke said yesterday?

No, it’s not just you.

Well, that's good to know. I mean, it seems like a whole bunch of us have been saying this makes no sense, and we don't want our hard-earned taxpaying dollars going down the drain, but we felt like voices crying out in the wilderness. Perhaps we are not alone afterall:
I’d add a political-economy point. Here’s Noam Scheiber, in the new TNR economics blog:

Yesterday afternoon I spoke to a senior Democratic aide in the Senate who repeatedly emphasized that, the way things stand now, it would be almost impossible to get another cent for the banks. Congress has “bailout fatigue,” the aide said.

Indeed. As long as capital injections are seen as a way to bail out the people who got us into this mess (which they are as long as the banks haven’t been put into receivership), the political system won’t, repeat, won’t be willing to come up with enough money to make the system healthy again. At most we’ll get a slow intravenous drip that’s enough to keep the banks shambling along.

More and more, it looks as if we’re headed for the decade of the living dead.

I couldn't have said it better myself. But like I said, I'm not a major economist who won a Nobel Peace Prize. Krugman is and did, so I'm gonna listen to him.

So speaking of banks wanting more money, guess who is back at the trough asking for more money from us, the taxpayers I'll give you a hint - it's an alphabet company. Yep - you got it, AIG:

Hell freakin' yeah, they're back. Some nerve, too, if you ask me, especially after their lavish spending ways. They want us to continue to subsidize them when tey have not demonstrated any fiscal restraint or responsibility?? Are you kidding me?

And while I am on this topic, it is high past time for the Democrats to stop blaming this situation totally on the Republicans. I can understand WHY they are trying to convince everyone that they had absolutely NOTHING to do with this, but the reality is that they have been in charge of BOTH Houses of Congress for over two years now. Where was their oversight of the SEC, in its non-existent oversight of people like Bernie "Made-Off"? Where were they when Franklin Raines ran Fannie Mae into the ground (and Raines, who left in disgrace, was one of Obama's advisers)? Where were they when Jim Johnson ran Freddie Mac into the ground (and we know where Tim Johnson is - he was on Obama's Veepstakes Search)?

So, yeah - Bush was horrible - we know that. But for the past 2 years, the DEMOCRATS have been the ones in charge of the purse-strings and the oversight, so stop the blame game, start taking some responsibility, and STOP HANDING OUT OUR MONEY LEFT AND RIGHT!!! Enough already!!

And that ESPECIALLY goes for you, Nancy Pelosi, with this new $410 BILLION dollar package chock-full of pork the House is proposing!! ENOUGH!!!


Arturo Ui said...

Hi Amy,

Since you're a fan of Professor Krugman (like me), I thought I'd share some of today's column with you. It's probably the first time Paul has been so positive on Obama since the election. This is just an excerpt, please read the whole thing:

The budget will, among other things, come as a huge relief to Democrats who were starting to feel a bit of postpartisan depression. The stimulus bill that Congress passed may have been too weak and too focused on tax cuts. The administration’s refusal to get tough on the banks may be deeply disappointing. But fears that Mr. Obama would sacrifice progressive priorities in his budget plans, and satisfy himself with fiddling around the edges of the tax system, have now been banished.

For this budget allocates $634 billion over the next decade for health reform. That’s not enough to pay for universal coverage, but it’s an impressive start. And Mr. Obama plans to pay for health reform, not just with higher taxes on the affluent, but by putting a halt to the creeping privatization of Medicare, eliminating overpayments to insurance companies.

On another front, it’s also heartening to see that the budget projects $645 billion in revenues from the sale of emission allowances. After years of denial and delay by its predecessor, the Obama administration is signaling that it’s ready to take on climate change.

And these new priorities are laid out in a document whose clarity and plausibility seem almost incredible to those of us who grew accustomed to reading Bush-era budgets, which insulted our intelligence on every page. This is budgeting we can believe in.

Rabble Rouser Reverend Amy said...

Hey, Arturo -

Thanks for that - I hadn't actually seen that yet today. It is definitely an interesting perspective.

As with any gov't budget, LOTS of "ifs" there, including the health care piece. I am ALL for universal health care, but Paul Krugman was VERY clear during the campaign that Obama's plan was more expensive, and not as comprehensive as Clinton's. Whether or not he is still going with that particular plan, I don't know (do you?). But I understand the full cost will be closer to a trillion dollars for it.

I don't know abt you, Arturo, but these costs of trillions of dollars when the market continues to spiral down on these plans and budgets are a real concern to me. The debt is going to be staggering. AND, from what I saw this morning, there is not a lot of belief that we will have the kind of increase necessary to halve the deficit by Obama's projections.

And that's just it - these are all just guesses, you know? That's the thing abt dealing with these kinds of numbers is that they aren't writ in stone and anything can change them.

Anyway - thanks for the article!

Rabble Rouser Reverend Amy said...

Btw, Arturo, Larry had this article over at No Quarter abt the new budget:

It includes information on the level of charitable giving by the Obamas and the Bidens - not very impressive. But the point is that this new budget is going to greatly constrain charitable giving.

And, it will quadruple the federal deficit. Yikes.

Anyway - just thought you might be interested.

insightanalytical said...

Thanks for the update on AIG...More on AIG here...and the Canadian bank buying AIG's Canadian book of business. So, AIG is selling off parts, getting $$ and we give them MORE....

Canadian Banks On the Move Buying U.S. Banks While Bailout Recipient AIG Sells Canadian Life Insurance Business to Bank of Montreal (”Picking over the Carcasses”)

Rabble Rouser Reverend Amy said...

Thanks Insight Analytical! I appreciate the additional information. Interesting, yet disconcerting...