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Sunday, March 22, 2009

Great Recession Roundup — March 23, 2009

Items of Interest:

Populist Rage Gage

Newsweek: Populist RageNewsweek:
Do populist outbursts like the one sparked by the AIG bonuses represent a threat to capitalism—or an opportunity? Our essayists on populism and its discontents.

Michael Kazin / Newsweek:
The Outrage Factor -- Don't Let the 'Big Men' Win

Dorothea Lange traveled around rural America during the late 1930s, creating indelible images of the Great Depression. One day, she stopped outside a gas station and snapped a picture of a large sign. It read: THIS IS YOUR COUNTRY. DON'T LET THE BIG MEN TAKE IT AWAY FROM YOU. Seventy years later, citizens irate at the huge bonuses AIG paid out to top executives know just how that feels...

  • Joel Kotkin:
    Anger Could Make Us Stronger

  • Robert J. Samuelson:
    Rage Could End Up Hurting Us -- The story of American capitalism is, among other things, a love-hate relationship. We go through cycles of congratulation, revulsion and revision...

  • Robert H. Frank:
    Why Big Paydays Aren't All Bad -- If you're not angry at AIG right now, you probably lack the capacity for moral outrage. But anger at AIG is also spilling onto a broader range of targets. And unless we're careful, we'll shoot ourselves in the foot...

  • Rick Perlstein:
    Our American Common Sense -- Our pundits worry that a populist rage is loose in the land—pitchforks everywhere! My first reaction upon hearing that was to dismiss the word "populist" as a distraction, an epithet meant to recall episodes in which mass rage made sound policy deliberation impossible...

  • Fareed Zakaria:
    The Trouble With Subsidies -- I'm certainly not going to defend those AIG bonuses. But the trouble with populist outrage is that it bubbles over, sweeping from one justifiable issue across to many others...

  • Carmen Reinhart and Kenneth Rogoff:
    Don't Buy the Chirpy Forecasts -- The history of banking crises indicates this one may be far from over...

    Who's to Blame: Washington or Wall Street?

  • Hardtimes:
    Economic Potholes of the Past and Present

    Argentine Banking Crisis
Follow the Bailout Cash — There was plenty of outrage on Capitol Hill last week over the executive bonuses paid out by AIG after getting federal bailout money. But another money trail could make voters just as angry: the campaign dollars …
Tim Geithner unveils Toxic Asset Plan$1 Trillion Toxic-Debt Plan

Tim Geithner / Wall Street Journal:
My Plan For Bad Bank Assets -- Today, we are announcing another critical piece of our plan to increase the flow of credit and expand liquidity. Our new Public-Private Investment Program will set up funds to provide a market for the legacy loans and securities that currently burden the financial system.

The Public-Private Investment Program will purchase real-estate related loans from banks and securities from the broader markets. Banks will have the ability to sell pools of loans to dedicated funds, and investors will compete to have the ability to participate in those funds and take advantage of the financing provided by the government.

The funds established under this program will have three essential design features. First, they will use government resources in the form of capital from the Treasury, and financing from the FDIC and Federal Reserve, to mobilize capital from private investors. Second, the Public-Private Investment Program will ensure that private-sector participants share the risks alongside the taxpayer, and that the taxpayer shares in the profits from these investments. These funds will be open to investors of all types, such as pension funds, so that a broad range of Americans can participate...
more discussion of Geithner Plan:
Jeremy P. Jacobs / The Hill's Blog Briefing Room: Geithner lays out toxic asset plan
Ben Pershing / Washington Post: A New Week, A New Economic Plan to Sell
Caitlin Taylor / Political Punch: Will the Public Want to Partner with Wall Street?
Betsy Newmark / Betsy's Page: Obama and the AIG bonuses
Barry Ritholtz / The Big Picture: US Futures Higher: Dow 212+
James Joyner / Outside The Beltway: Geithner Plan: TARP 2.0?
Doug Stanglin / On Deadline: Geithner set to unveil bank bailout plan
Brad DeLong / Grasping Reality with Both Hands: The World Is Divided into Four Groups of People
Michelle Malkin:
The David Copperfield School of Economic Recovery, Pt. II --Today, hapless, truth-challenged tax cheat Treasury Secretary Tim Geithner officially unveils another $1 trillion magic trick. Instead of letting failed banks fail, we’ll have another desperately massive and massively desperate attempt to prop them up through a “public private partnership investment program.” ...
U.S. Treasury Announces $1 Trillion Toxic-Debt Plan

New York Times:
U.S. Rounding Up Investors to Buy Bad Assets
Deborah Solomon / Wall Street Journal: Geithner Banks on Private Cash
Kevin G. Hall / McClatchy Washington Bureau: Toxic Assets Plan, Take 2: Will Geithner get it right this time?
Darren Lenard Hutchinson / DISSENTING JUSTICE: Surprise, Surprise: Potential Participants in Toxic Assets Plan …
Leo Kolivakis / naked capitalism: Guest Post: Why Does Failure Merit Reward?
Robert Stein / Connecting.the.Dots: Banks Are Lending—to Their Own
Dan / Riehl World View: Obama's Latest Move Makes No Sense
Edmund L. Andrews, Eric Dash & Graham Bowley / NY Times:
Toxic Asset Plan Foresees Big Subsidies for Investors -- The plan to be announced next week involves three separate approaches. In one, the Federal Deposit Insurance Corporation will set up special-purpose investment partnerships and lend about 85 percent of the money that those partnerships will need to buy up troubled assets that banks want to sell.

In the second, the Treasury will hire four or five investment management firms, matching the private money that each of the firms puts up on a dollar-for-dollar basis with government money.

In the third piece, the Treasury plans to expand lending through the Term Asset-Backed Secure Lending Facility, a joint venture with the Federal Reserve...
Frank Rich / NY Times:
Has a ‘Katrina Moment’ Arrived? -- A CHARMING visit with Jay Leno won’t fix it. A 90 percent tax on bankers’ bonuses won’t fix it. Firing Timothy Geithner won’t fix it. Unless and until Barack Obama addresses the full depth of Americans’ anger with his full arsenal of policy smarts and political gifts, his presidency and, worse, our economy will be paralyzed. It would be foolish to dismiss as hyperbole the stark warning delivered by Paulette Altmaier of Cupertino, Calif., in a letter to the editor published by The Times last week: “President Obama may not realize it yet, but his Katrina moment has arrived.” ...
David Kotok / The Big Picture:
A Lynch Mob! -- “Let’s go hang ‘em.”

American history is replete with examples of lynch mobs taking control of a situation and inflicting injustice. In the end most lynch mobs have dealt harmful blows to society. Congressional action to punish AIG employees over the bonus issue is already seeding that outcome...
Time Magazine: How AIG Became Too Big to FailBill Saporito / Time:
How AIG Became Too Big to Fail -- Then Geithner's staff made the discovery that would infuriate nearly everyone in Washington. On March 10, the Secretary learned, 10 days after his staff first got wind of it, that AIG had paid out $165 million in retention bonuses to executives at the unit that compelled the U.S. to bail out the company in the first place. It took Geithner until 7:40 the next night to place what must have been a tense phone call to AIG's newish CEO, Ed Liddy. The bonuses were not tenable; they had to be canceled, he demanded. Liddy, a dollar-a-year man who took over the company after the bonuses had been promised, replied that AIG's lawyers had decided that the contracts could not be broken without even bigger costs to taxpayers. Geithner sent Treasury's lawyers searching for a way out, but they couldn't find one...
Protesters visit AIG officials' lavish Conn. homes -- A busload of activists representing working- and middle-class families paid visits Saturday to the lavish homes of American International Group executives to protest the tens of millions of dollars in bonuses awarded by the struggling insurance company after it received a massive federal bailout...
President Barack Obama and correspondent Steve Kroft walk along one of the White House's colonnades on Friday, March 20, 200960 Minutes / CBS News:
Obama On Public's Anger At Wall Street -- Also Tells 60 Minutes He Wouldn't Accept Tim Geithner's Resignation Even If Offered

In his longest interview since taking office, President Barack Obama tells 60 Minutes correspondent Steve Kroft that New York's Wall Street executives need to get out of town to appreciate the public's anger towards them and that embattled Treasury Secretary Timothy Geithner's job is safe.

The president even joked that were Geithner to tender his resignation, he would say, "Sorry, Buddy, you've still got the job." ...
Craig Gordon / The Politico:
Kroft to Obama: Are you punch-drunk? — President Barack Obama said he believes the global financial system remains at risk of implosion with the failure of Citigroup or AIG, touching off “an even more destructive recession and potentially depression.” — His remarks came in a “60 Minutes” …
The Politico:
Philip Elliott / Associated Press: GOP predicts doomsday if Obama budget passed
Martina Stewart / CNN:
Gregg: ‘This country will go bankrupt’ — WASHINGTON (CNN) - Even though he was almost a member of the new Obama administration, New Hampshire Republican Judd Gregg Sunday slammed President Obama's approach to handling the country's fiscal outlook. — “The practical implications …
John / Power Line:
ARE WE GOING BANKRUPT? — Senator Judd Gregg says that Barack Obama's budget will drive the United States into bankruptcy. That's a plausible claim. So, what public needs are so urgent that they are worth risking financial collapse for? The London Times itemizes some of the earmarks …
Tony Allen-Mills / Times of London: Democrat anger at Obama overkill
Associated Press:
Sen. Gregg says Obama budget will bankrupt US
Jonathan Martin / The Politico:
Friendly fire: NYT hits Obama — The leading liberal voices of the New York Times editorial pages all criticized—and, in some cases, clobbered—President Obama on Sunday for his handling of the economy and national security. — It's not unusual for Barack Obama to take a little friendly fire from the Times...
Orlando Sentinel:
Orlando 'Tea Party' rally draws more than 4,000 -- Singer Lloyd Marcus told the crowd assembled in Lake Eola Park on Saturday that he was going to give them his take on the first days of the Obama administration.

Then he shrieked.

That pretty much summed up the mood in the park Saturday afternoon, when more than 4,000 people attended the Orlando Tea Party, a conservative rally aimed at expressing discontent with Washington...
Blue Texan / Firedoglake: Conservative Bloggers Furious at Media for “Absence” of “Tea Parties” Press Coverage

Glen Reynolds / Pajama Media:
A.I.G. PROTESTS VS. ANTI-STIMULUS PROTESTS -- Who’s got the real energy? “I’m sure the MSM won’t report this, but the far bigger demonstration was of fiscal conservatives , not anti-business radicals. . . . Now, let me remind you. This is suburban CT on a not so warm day we are talking about. We don’t do protests and ginning up a crowd of any size is tough. But they showed in Ridgefield today. And I can’t remember ever hearing about Dodd being protested before. . . . We have 300 folks outraged at Dodd. They got 40 upset at AIG executives. I like our odds” ...
AIGEliot Spitzer / Slate.com:
The Real AIG Scandal, Continued! -- The transfer of $12.9 billion from AIG to Goldman looks fishier and fishier.

The AIG scandal is getting ever-more disturbing. Goldman Sachs' public conference call explaining its trading relationship and exposure with AIG established, once again, that Goldman knows how to protect itself. According to Goldman, even if AIG had failed, Goldman's losses would have been minimal...
Tim Padgett / Time.com:
Is Dry Wall the Next Chinese Import Scandal? -- The U.S. Consumer Product Safety Commission is also investigating the complaints. If the drywall proves to be the culprit, plaintiff attorneys say tens of thousands of potentially affected homes could see a further drop in house prices already hammered by the credit crisis...

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia