Paul Krugman: Thoughts on AIG

[backscatter712]

http://krugman.blogs.nytimes.com/2009/03/20/aig/

Preliminary thoughts on the tax bill:

1. It’s not the way you should make policy — it’s clumsy, and it will punish some innocent parties while letting the most guilty off scot-free

2. But — there wasn’t much alternative at this point. And for that I blame the Obama people.

I’ll leave to others the question of who knew or should have known that the bonus firestorm was coming; but it’s part of a pattern. At every stage, Geithner et al have made it clear that they still have faith in the people who created the financial crisis — that they believe that all we have is a liquidity crisis that can be undone with a bit of financial engineering, that “governments do a bad job of running banks” (as opposed, presumably, to the wonderful job the private bankers have done), that financial bailouts and guarantees should come with no strings attached.

This was bad analysis, bad policy, and terrible politics. This administration, elected on the promise of change, has already managed, in an astonishingly short time, to create the impression that it’s owned by the wheeler-dealers. And that leaves it with no ability to counter crude populism.

Couldn't have said it better myself!

Obama needs to get rid of Geithner and Summers already!

[NJmaverick]

1. What a shocker Krugman blames Obama

what's next a news flash that the sun is hot?

Why is it that everytime this hack takes a cyber dump, some DUer feels the need to bring it to DU?

[backscatter712]

3. Oh, I forgot!!!

This is the left version of Free Republic - dissent is not to be tolerated!

Silly me! I forgot that Obama is not to be questioned, even when he's screwing up! What was I thinking?!

[HiFructosePronSyrup]

4. "What was I thinking?!"

Apparently you thought we wouldn't recognize poutrage when we see it.

[backscatter712]

8. *snort* Poutrage?

You really need to go back on your meds.

[NJmaverick]

5. Speaking of FR, why not start posting their articles as well

Wouldn't be any different than the crap Krugman spews out.


Krugman is a hack that sold out his credibility in his pathetic and wrong minded crusade against President Obama. He has ZERO credibility.

[Name removed]

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[Zenlitened]

45. Hooray for you!

Your trollish personal attack has been alerted on
From: NJmaverick
Date: Mar-20-09 05:19 PM

that will be enough of your inane and childish personal attacks.

But, sadly...

That member does not wish to receive private messages

If you have any questions, please contact the site administrator.
Click here to go back to previous page.

Oh well. I'm confident you'll carry on the inanity all by your little self! :hi:

[polichick]

7. It's much safer just to sing another chorus of "Sunshine, Lollipops and Rainbows."

[stillcool]

9. Depends on the choir...

and which maestro they beckon to.

[polichick]

14. First you accuse me of posting something...

...I never posted (which you admitted) ~ and now you're stalking. Take a hike, would ya?

[stillcool]

19. No..I'm just reading DU today..

sorry I'm running into you....believe me.

[polichick]

24. You're lying and stalking.

[stillcool]

26. you must have a high opinion of yourself..

got to go cook dinner now...you have a nice life!

[polichick]

27. Just know lying and stalking when I see it.

[JDPriestly]

11. Krugman is right.

Take a little time to read upon the 18th century in France and the French revolution.

I do not want to see a revolution here. I believe in our constitutional form of government. But, the let them eat cake attitude of many in D.C. and on Wall Street is beginning to enrage people who have shown no interest in politics until now.

This is not about some vague concept like liquidity. This is about people living in tents in homeless encampments. Pictures of that life were on the front page of today's L.A. Times. The AIG bonus scandal was on the front page yesterday.

Obama needs to focus on finding solutions for Main Street. The team he has in place haven't been to Main Street since they were kids. Obama needs a new team. Paul Krugman would be a good person to ask for some names and resumes.

[Name removed]

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[NJmaverick]

22. Krugman is an anti-Obama idiot. It's shameful that any DUer would post his Free Republic grade

crap here at DU.

[JDPriestly]

46. You posted that exact same response to an earlier post of mine.

Are you some kind of bank employee posting on DU? Friend of Geithner? Krugman understands what is going on.

None of Obama's appointees have a clue. They are the same people who shut their eyes while the dirty dealings that lead to this crisis were taking place. Get rid of Obama's economic advisers and get some better ones. I hope Obama wises up before he loses support around the country.

We here on DU watch the news more closely than the sheepie out there. It is hard to fool us.

My husband and I have been watching the financial markets for years. We have little money due to the kinds of work we have done during our lives, but we were savvy enough to see this coming.

Did Tim Geithner see this coming? If so, when? And why didn't he do more earlier (when he was the head of the Fed in NY) to stop the crisis? I look at my record of prognosticating the economic downturn and

I feel pretty confident of my ability to judge who is the better economist: Krugman or Geithner. It's Krugman.

[leftchick]

55. oh no, their eyes were not shut

summers, geithner and rubin had their eyes wide open as they themselves made hundreds of millions of dollars during this scam. Our fucking money! It really is unconscionable to believe obama put these rats in his administration. It makes me sick.

[girl gone mad]

47. You couldn't be further from the truth.

The last thing this country needs is more cheerleaders for incompetence.

[Threedifferentones]

57. If Krugman is an idiot...

Show us your sources which prove Obama's policies are going to help the average American more than a bunch of rich liars.

I am no economist, so for now I will not insist here that Krugman is right or wrong. But, people who go around personally attacking apparently reasonable arguments without providing ANY COUNTER EVIDENCE WHATSOEVER IN ANY OF THEIR POSTS generally need to STFU.

[sendero]

53. Krugman is right..

... and Obama is WAY behind the power curve on this, or he's bought off like the rest of them. Doesn't really matter which here in a year or two - the result will be the same.

[Name removed]

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[NJmaverick]

25. LOL! It appears you hate me as much as Obama

I wouldn't think such a limited number of brain cells were capable of generating so much emotions or target two at once.

[HiFructosePronSyrup]

2. I say Obama needs to fire Krugman.

What's that? Krugman doesn't work for Obama?

Well thank God for small favors.

[NJmaverick]

6. Well juding by the crap Krugman has been spewing, it's clear

he hasn't forgotten

[Name removed]

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[JDPriestly]

17. Krugman is far wiser than Geithner.

Geithner should have warned about the bonus provision. He should have been pointing the finger at the Bush administration about that on the day after the inauguration. By letting that political time bomb blow up in Obama's face, Geithner showed that he does not have the political sense to be on the Obama team at this time. He should go back to running a small town bank or whatever he does well. Geithner is a "nice guy," and Obama likes "nice guys." That's not how the world works. Obama needs economic advisers who have with utmost integrity who have proved that they have the strength to take unpopular stands and do what is right in difficult situations. None of the people on Obama's economic team are up to the task -- at least they haven't demonstrated that they are up to the task thus far.

Could I do it? No. But there are people who could, and Obama needs to find them. He doesn't have much time.

[NJmaverick]

20. Krugman is a fool with a personal agenda. His crusade has removed any semblance of wisdom

from his writing. The only thing he still serves is a sorry excuse for the anti-Obama DUers to wail and cry and pretend their hatred of Obama has any legitimacy

[Name removed]

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[CANDO]

42. God forbid we might listen to a Nobel winner for Economics.

Where are Geithner's credentials on economics? Oh, that's right...schmoozing in the same cesspool with those responsible for the mess in the first place!

[Eric J in MN]

10. The bill "will punish some innocent parties"...

...with a 90% tax on the part of their bonus which exceeds $250,000.

That's OK by me.

[backscatter712]

16. If you think our government should be going "CONGRESS ANGRY!!! CONGRESS SMASH!!!"...

That's your choice, but I think Congress could be looking for more productive ways to deal with the problems on Wall Street, like bringing back Glass-Steagall style regulation and giving the SEC and other regulators some teeth.

As good as it may feel, this bill is a bill of attainder and an ex-post-facto law, and it has a high probability of being shot down in the courts.

[tbyg52]

30. >>bill of attainder and an ex-post-facto law

It sure is. We (in the collective sense) have been doing a lot of Constitution-shredding - guess it's getting to be a habit.

[depakid]

49. No, it isn't!

http://blogs.wsj.com/law/2009/03/18/would-an-aig-bonus-tax-pass-constitutional-muster-a-tribe-calls-yes/

[tbyg52]

54. I stand corrected on ex post facto (that it applies only to criminal law)

but regarding bill of attainder, the article pretty much agrees that it could be seen that way, and suggests ways to get around it.

[Eric J in MN]

33. Congress has the power to tax....

...including changing 2009 taxes during 2009.

"Bill of attainder and an ex-post-facto" are about convicted someone for a crime.

[backscatter712]

35. Even so, this bill is short-sighted and not well thought out.

One thing Geithner suggested that I agree with (and you thought I had only hate for him...) was the idea of subtracting the costs of those bonuses from future aid payments to AIG. This has the problem of being difficult to enforce, but I think the correct target is AIG, not its employees. Granted, many of the employees were assclowns who were making the decision to throw money around wastefully, but it was AIG as a corporation that spent federal money to give its employees bonuses.

I think we should be looking at the big picture - preventing these sorts of stunts from happening in the future, which is something this tax bill does not do. As I mentioned, I suggested bringing back Glass Steagall, regulating the hell out of Wall Street, enforcing anti-fraud laws - that sort of thing.

There's the distinct possibility that these bonuses were awarded fraudulently. I think auditing AIG's books is in order, maybe bringing in the DOJ...

[Eric J in MN]

39. I don't want people at bailed-out companies to get bonuses exceeding $250,000.

I'm glad the House voted for a 90% tax over $250,000. The recipients may not have jobs at AIG at all if not for the taxpayer support.

If Tim Geithner gave AIG less on the next bailout to respond to the public about bonuses, then he would just give them more during the bailout after that.

[backscatter712]

43. Looks like Bernanke and Congress are working on that.

IIRC, the stimulus bill, for its flaws that allowed AIG to pull this stunt, won't allow it to happen again going forward.

That's why I'm a fan of nationalizing these kinds of companies - so we can fire the assclowns that ran these businesses into the ground instead of giving them bonuses and golden parachutes.

[Eric J in MN]

44. The stimulus bill only affects new contracts, and so...

...AIG employees with multi-year contracts can probably get the bonuses again next year, if AIG is still in business next year.

[girl gone mad]

48. This is part of the big picture.

Any move that discourages employees of financial firms from looting their companies and then later profiting again at the expense of the taxpayer is a step in the right direction.

When we let them get away with it, they become emboldened to do it again. We've seen it happen time after time.

[Fleshdancer]

28. I'm open to constructive criticism....

I just wish the critics would start giving it. If the bailouts were wrong, then what should have been done? If the bailouts weren't enough, then how much should have been spent? If Geithner and Summers should go, then who should and will replace them? How should we handle the AIG bonus issue? What can be done to fill all the empty positions at the Treasury right now?

:shrug:

[NJmaverick]

31. You ask excellent questions. Ones that Krugman is incapable of answering

[backscatter712]

32. IMHO... nationalize the zombie banks and AIG. Recapitalize while nationalized. And regulate them!

Yes, we'd still be spending huge amounts of money, but we could fire the assclowns that ran these banks and companies into the ground, bring in some forensic accountants and auditors to dig through the books and pick out all the bad paper so it can be triaged - some risky loans like mortgages can be saved if the borrowers are honest and get a little help, some of those loans are just garbage and should be written off entirely, fund them with some sane ground rules on how the money is to be spent (in other words, satisfying creditors, re-capitalizing, doing some sane lending to get the credit market moving again), and then put them under new management and new regulations before selling them back to the private markets. Make sure bank depositors are protected and have access to their money, and keep lending, under strict rules to manage the risk.

IMHO, I'd put Robert Reich in as Treasury Secretary - he has previous experience on the cabinet, he has economic experience, he's incredibly smart, knows his stuff, and is a Keynesian, who'd be more motivated to start fixing things right.

While we're at it, Congress needs to bring back Glass-Steagall. Re-regulate Wall Street. Separate investment banking from commercial banking, put in strict accounting and risk-management rules, require paper-trails for auditing purposes, throw the fraudsters and Ponzi-schemers in prison. Impose some rules on short-selling, punish price-manipulation and other ways of gaming the system severely, and put all the Gordon Gekkos on a leash.

It's not that I object to bailouts - I think they're necessary. I just think that there's far too little accountability as to what's happening to the bailout money - nationalization and regulation is what's needed to make sure the money we're spending to kick-start these firms and fix the economy is being used wisely and effectively, and keep the bad actors from robbing us blind.

[Fleshdancer]

38. great answers!

Thank you for taking the time to respond to my questions. I like the idea of forensic accountants...I had no idea this profession existed. Oddly enough, this concept would make an interesting tv show.

Now I'm going to google Robert Reich since I don't know much about him. What do you think the odds are of him taking the job if offered?

I would like to see new blood injected at the SEC too. There's no excuse for allowing Madoff to get away with his scheme for as long as he did.

[Eric J in MN]

40. RE "Separate investment banking from commercial banking"

Also, separate insurance underwriters from investment banks (the AIG situation.)

[backscatter712]

41. Separate and simplify!

Part of the problem is that since deregulation, the Wall Street fraudsters have been able to mix their investments together, to hide bad investments and crooked dealings, hide risks, obfuscate with technicalities, and the end result is things like credit default swaps which have been so many steps removed from actual investments in making things and paying for services, or insuring such things, that nobody has any idea what the risk looks like.

Separate them! That's what Glass-Steagall did. Then insurance becomes a straightforward matter of calculating risk using actuarial math, crunching the numbers to get a premium; and similarly, other investments become easier to understand, easier to measure the risk, and sanity returns! It removes places for the crooks to hide their ill-gotten gains and disguise their thefts too.

[leftchick]

59. this is one of the best most logical posts

I have seen yet regarding this issue. Obama's team is comitting the same mistakes that got us here.
:applause:

[Eric J in MN]

34. Instead of bailing out companies like AIG and CitiGroup,

...the govt could have broken them up into little pieces.

If any of the new, small companies failed, it would have had less impact.

[backscatter712]

36. Very good point!

"Too big to fail!" is a problem that needs to be fixed. It's time to dust off the Sherman Act and bring the anti-trust hammer down on these firms. Break them into pieces, force them to compete, put in some regulations so the market is a level playing field, and behavior will improve greatly!

[Eric J in MN]

37. Yes, the standard of anti-trust has been...

..."Is it a monopoly" but the new question should be, "Is it too big too fail?"

In the latter case, break it up.

[girl gone mad]

50. It's all been hashed and re-hashed.

Check out the economy forum or read SMW for starters. We talk about viable solutions every day. Krugman, Stiglitz, Roubini, and dozens of other top economists have all laid out plans far more reasonable than what Geithner proposes.

[The Backlash Cometh]

29. Krugman is right.

Obama went on Leno and said he was surprised by the AIG bonuses. He shouldn't have been.

[BlooInBloo]

51. (a) Krugman has always been anti-Obama - was laughable in the primary, for example...

(b) He's probably right on *this* issue.

(c) As Krugman makes pretty clear, *this* issue is more of a Geithner issue than an Obama issue. It certainly makes you wonder why Obama keeps him around, but I'm not expecting Obama to consult me on such matters - c'est la vie. Obama is smart and well-intentioned - I'm certain he's got his reasons.

[MasonJar]

52. I cannot believe this post. It has taken a serious subject and turned

it into an officious altercation. I cannot personally understand where Obama is coming from with Geithner and Summers. Geithner was one of the Bush architects of the debacle that brought us bailout with no restrictions. He did not pay massive amounts of taxes and he is the Treasury Secretary. Read Matt Taibbi's Rolling Stone article above and find out what danger we are in and stop fighting. This is crucial. And in my opinion Paul Krugman has no personal stake in this; he is an academic, who quite possibly is worried about his country. He praises Obama when he thinks he is right and tells him when he thinks he is wrong. And Krugman is a Nobel Prize winner in Economics. Obama is a relative newcomer in politics, who is already overwhelmed. He needs the BEST staff, not a bunch of insiders.

[leftchick]

56. I can't either

it is a freakin circular firing squad while we lose what is left of this country. :(

[Tierra_y_Libertad]

58. Politicians owned by the wheeler dealers? Water is wet.

"The government of my country snubs honest simplicity, but fondles artistic villainy, and I think I might have developed into a very capable pickpocket if I had remained in the public service a year or two."

"Right here in this heart and home and fountain-head of law this great factory where are forged those rules that create good order and compel virtue and honesty in the other communities of the land, rascality achieves its highest perfection."

"It could probably be shown by facts and figures that there is no distinctly native American criminal class except Congress."

"I think I can say, and say with pride, that we have some legislatures that bring in higher prices than any in the world."

Mark Twain

[leftchick]

60. oh god it is getting worse by the day....Obama On Public's Anger At Wall Street

Also Tells 60 Minutes He Wouldn't Accept Tim Geithner's Resignation Even If Offered :grr:


http://www.cbsnews.com/stories/2009/03/18/60minutes/main4873938.shtml?tag=topStory;topStoryHeadline?ref=fp2


(CBS) 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."

The 90-minute interview Friday evening began on the White House lawn and ended in the Oval Office where the president also addressed the economy, the bonus tax, healthcare, automakers' bailouts, Afghanistan and Pakistan, and answered recent criticism from former Vice President Dick Cheney.


The president said neither he nor Geithner has mentioned resignation from his Treasury post, and that criticism is natural. "It's going to take a little bit more time than we would like to make sure that we get this plan just right. Of course, then we'd still be subject to criticism," he tells Kroft. "'What's taken so long? You've been in office a whole 40 days and you haven't solved the greatest financial crisis since the Great Depression!'" Obama said with a laugh.