2009 - %3, April

Bailout for Breakfast: GM Rolls Out New Plan

| Mon Apr. 27, 2009 5:40 PM EDT

This story first appeared on ProPublica.

It is the latest from ProPublica's new bailout blog. Check out the all-seeing database of the bailout billions.  

This morning, General Motors is rolling out its third new business plan since December. The plan, in brief: cut 21,000 jobs, a third of its workforce, close a number of its plants, drop the Pontiac brand and try to persuade 90 percent of its bondholders to swap their notes for equity in the company.

Treasury officials gave GM a June 1 deadline to restructure. But the government aid isn’t likely to slow any time soon, reports the Wall Street Journal:

The U.S. Treasury will extend $11.6 billion more to GM, in addition to $15.4 billion in existing loans. The government will forgive half the debt in exchange for equity in a restructured GM.

Should all that come to pass and GM lands more than $27 billion in aid, that would make the company the fifth largest beneficiary of taxpayer money in the bailout so far, behind AIG, Bank of America, Citigroup and Freddie Mac.

In other auto news, Chrysler says it has struck a deal with the UAW. That’s progress, but the company still has to reach a deal with its big bank lenders by Friday, the deadline set by the administration for a restructuring deal.

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Monday Top Five

| Mon Apr. 27, 2009 3:50 PM EDT

This week, a couple tunes good for indie dance parties, a surprising and hilarious mashup, a Brooklyn duo takes an eventful trip to Times Square, and Kate Bush fans have a new artist to worship.

 

 

 

1. Passion Pit – "The Reeling" (from Manners out May 26 on French Kiss)

This Boston-based band charmed me (and lots of other people based on their Top 30 ranking on iTunes) with their quirky "Sleepyhead," but I was wholly unprepared for the raucous good time that is "The Reeling." Tinkly '80s-style synths are offset by stomping rock drums, and the sing-along chorus is irresistible: "Oh, noooo!"

2. Bon Jovi vs. Nina Simone – "Like a Life on a Prayer" (Mad Mix Mustang mashup, download at his web site)

Usually, the point of a mashup is to be amused at the transformation of both sources, but I'd never heard this Nina Simone track before. However, it's perfect with the Bon Jovi lyrics, and the track ends up sounding like a Mark Ronson souled-up retro-remix, with some Austin Powers silliness thrown in.

"We Could Have Done This the Right Way"

| Mon Apr. 27, 2009 3:27 PM EDT

A must-read from Michael Isikoff of Newsweek starring FBI agent Ali Soufan, the man who would have led the interrogations of America's detainees if the war on terror had been prosecuted in a different universe these past eight years:

Gingrich v. Gingrich

| Mon Apr. 27, 2009 2:59 PM EDT

It's hard to get too worked up when a politician turns out to be opportunistic, but Media Matters documents a pretty stunning case of cynicism from Newt Gingrich today.  Last week Gingrich vilified a Democratic cap-and-trade plan for carbon emissions as a "command-and-control, anti-energy, big-bureaucracy agenda, including dramatic increases in government power and draconian policies that will devastate our economy."  But two years ago, when he was in his "big ideas for conservatives phase," he was cap-and-trade's biggest fan:

I think if you have mandatory carbon caps combined with a trading system, much like we did with sulfur, and if you have a tax-incentive program for investing in the solutions, that there's a package there that's very, very good.  And frankly, it's something I would strongly support....The caps, with a trading system, on sulfur has worked brilliantly because it has brought free-market attitudes, entrepreneurship and technology and made it very profitable to have less sulfur.

Well, that's Newt for you: he dumps policy positions as quickly as he dumps wives.  But it also goes to show how fleeting conservative support for "market-oriented solutions" like cap-and trade is.  A lot of the liberal enthusiasm for cap-and-trade over the past decade has been based on the idea that it might be more acceptable to conservatives than a straight tax, but obviously that hasn't turned out to be the case.  Basically, they just don't want to do anything, full stop.

Republicans Stripped Flu Funding from Stimulus Package

| Mon Apr. 27, 2009 2:22 PM EDT

You can't blame everything bad that happens on right-wing policymaking--but you can usually count on it to make a bad situation worse. Conservatives didn't bring on the swine flu outbreak, any more than they caused Hurricane Katrina. But in both cases, they've made the federal government less equipped to respond to these disasters with possibly life-saving emergency services. 

As The Nation's John Nichols reported this morning, earlier this year, House Appropriations Committee chairman David Obey pushed hard for about $900 million in pandemic preparedness funding to be included in the economic stimulus legislation--but he "was ridiculed by conservative operatives and congressional Republicans." Nichols writes:

Obey and other advocates for the spending argued, correctly, that a pandemic hitting in the midst of an economic downturn could turn a recession into something far worse -- with workers ordered to remain in their homes, workplaces shuttered to avoid the spread of disease, transportation systems grinding to a halt and demand for emergency services and public health interventions skyrocketing. Indeed, they suggested, pandemic preparation was essential to any responsible plan for renewing the U.S. economy.

But former White House political czar Karl Rove and key congressional Republicans -- led by Maine Senator Susan Collins -- aggressively attacked the notion that there was a connection between pandemic preparation and economic recovery.

Nichols documents how Collins and other Republicans actually singled out the pandemic prevention funds as a prime example of profligate Democratic spending, and of unrelated projects being tacked on to the stimulus bill. They used it to score political points. Collins's vote was, of course, absolutely key to passage of the stimulus legislation in the Senate. So the only funding of this kind that that made it into the final conference version was $50 million for improving information systems at the Department of Health and Human Services. All support for frontline emergency services in the event of a pandemic was eliminated.

Wall Street Pay Already Returning to Normal

| Mon Apr. 27, 2009 2:11 PM EDT

The New York Times produces a killer chart. There are fewer jobs on Wall Street nowadays, but they aren't paying any less. (Via The Big Picture.)

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Intimate Homicide

| Mon Apr. 27, 2009 1:55 PM EDT

Via Matt Yglesias, sociologist Jay Livingston says that 30 years ago wives killed their husbands almost as frequently as husbands killed wives.  Today, there's a huge gap:

What's going on?  There's some free-form speculation in the original post, and in that spirit I'll offer some of my own.  I'll bet that part of the overall decline has to do with improved medical care: husbands and wives are still trying to kill each other, but the advent of universal 911 and better trauma care means that a lot more people survive these attempts.  So then the question becomes: why are men surviving murder attempts better than women?

Perhaps women are just less skilled murderers than men?  Perhaps women who try to kill their husbands are more likely to feel immediate remorse and call 911?  Maybe it has to do with choice of murder weapons.  I dunno.  But I wouldn't be surprised if differential survival rates are part of the story here.

Basel Squared

| Mon Apr. 27, 2009 1:35 PM EDT

Ezra Klein gets geeky:

One of the pieces of the crisis that I hadn't understood until recently, for instance, was the role that Basel II banking regulations played in the growth of the structured securities market. In essence, Basel II, which went into effect a couple years ago, held that a bank only had to keep half as much capital on hand for AAA-rated securities as for other types of assets. That created a huge incentive for banks to get more things rated AAA....

And that in turn made the creation of allegedly AAA-rated securities a growth industry.  If a bank holds a $100 BBB-rated security, for example, they're required to maintain $8 in capital reserves to back it up.  However, if they ring up their friendly broker at AAA-rated AIG and buy a credit default swap on that bond, it's suddenly rated AAA too and the bank only has to hold $1.60 in capital.  That $6.40 freed up, and with leverage of 20:1 that's $128 available for productive investments in America, my friend!  What a bargain.

(Though it's worth noting that European banks engaged in this kind of regulatory arbitrage at least as much as American banks.  Maybe more, in fact, which is why AIG ended up paying out so much money to Société Générale and Deutsche Bank.  American banks have gotten the lion's share of the attention so far for their shoddy asset portfolios, which is fair enough since America was the focal point for the subprime crisis, but European banks were pretty eager consumers of regulatory shenanigans as well.)

In any case, there are plenty of reasons to be skeptical of Basel II, and among other things it goes to show the difficulty of setting international standards in the world of finance.  One of the reasons Basel II is weaker than Basel I is that every country has its own financial industry idiosyncracies, and every country wants banking accords to treat their particular idiosyncracies lightly.  Basel II did that, and then took things even further by allowing banks to use their own internal models for credit risk because, you know, internal models had proven themselves so sophisticated and reliable.  Oops.

On the other hand, the Basel II accords weren't even published until 2004, and didn't get adopted in most countries for several years after that.  As weak as Basel II is, the credit bubble and its associated financial rocket science far predates it.  I'm not really sure how far you can go in blaming it for our current meltdown.

Hunkering Down

| Mon Apr. 27, 2009 12:40 PM EDT

Lawrence Wilkerson, Colin Powell's former chief of staff, thinks we need a special prosecutor to investigate Bush-era torture policies.  My MoJo colleague David Corn, the guy who first broke the Valerie Plame story, isn't so sure:

There's one problem with a special prosecutor: it's not his job to expose wrongdoing. A special prosecutor does dig up facts — but only in order to prosecute a possible crime. His mission is not to shine light on misdeeds, unless it is part of a prosecution. In many cases, a prosecutor's investigation does not produce any prosecutions. Sometimes, it leads only to a limited prosecution.

That's what happened with Patrick Fitzgerald. He could not share with the public all that he had discovered about the involvement of Bush, Cheney, Karl Rove, and other officials in the CIA leak case. Under the rules governing federal criminal investigations, he was permitted to disclose only information and evidence that was directly related and needed for the indictment and prosecution of Libby. Everything else he had unearthed via subpoenas and grand jury interviews had to remain secret. Repeatedly, Fitzgerald said that his hands were tied on this point. A special prosecutor, it turns out, is a rather imperfect vehicle for revealing the full truth.

David also says that lawyers he's talked to suggest that prosecutions would be difficult, which could leave us in the worst of all possible worlds: a long, drawn-out investigation that, in the end, produces not even a report or a set of indictment, let alone convictions.  No one would be satisfied.

David suggests an independent commission of some kind as the best way forward, and I'm tentatively inclined to agree.  Unfortunately, President Obama seems distinctly non-thrilled by the idea, and I doubt that Congress is especially eager to move forward either.  Porter Goss's op-ed last Friday in the Washington Post, where he insisted that both Democratic and Republican members of Congress knew what the CIA was doing and didn't object to it, may have been disingenuous in places, but I wouldn't be surprised if he's right about his essential point — or at least, close enough to right to make a genuinely independent commission as frightening a prospect for Dems as it is for the GOP.  It's probably the right thing to do, but if Obama's opposed and Republicans are opposed and Democrats are mostly running for cover, who's going to make it happen?

There's always the Senate Intelligence Committee, of course, but I wouldn't hold my breath that they're going to produce anything definitive.  Washington is hunkering down and hoping that this will all blow over as soon as the next crisis of the moment hits the front pages.  Unfortunately, they're probably right.

Yes, We Did Execute Japanese Soldiers for Waterboarding American POWs

| Mon Apr. 27, 2009 12:04 PM EDT

It stuns me that we are still having a debate, as a country, over whether or not what the Bush Administration did to detainees in the war on terror was actually torture. I would hope that this helps settle things. The fact-checking outfit called PolitiFact confirms that a McCain statement from 2007, dredged up recently by Paul Begala, is accurate:

"I forgot to mention last night that following World War II war crime trials were convened. The Japanese were tried and convicted and hung for war crimes committed against American POWs. Among those charges for which they were convicted was waterboarding," [McCain] told reporters at a campaign event.

"If the United States is in another conflict ... and we have allowed that kind of torture to be inflicted upon people we hold captive, then there is nothing to prevent that enemy from also torturing American prisoners."

McCain is referencing the Tokyo Trials, officially known as the International Military Tribunal for the Far East. After World War II, an international coalition convened to prosecute Japanese soldiers charged with torture. At the top of the list of techniques was water-based interrogation, known variously then as "water cure," "water torture" and "waterboarding," according to the charging documents. It simulates drowning.

R. John Pritchard, a historian and lawyer who is a top scholar on the trials, said the Japanese felt the ends justified the means. "The rapid and effective collection of intelligence then, as now, was seen as vital to a successful struggle, and in addition, those who were engaged in torture often felt that whatever pain and anguish was suffered by the victims of torture was nothing less than the just deserts of the victims or people close to them," he said.

In a recent journal essay, Judge Evan Wallach, a member of the U.S. Court of International Trade and an adjunct professor in the law of war, writes that the testimony from American soldiers about this form of torture was gruesome and convincing. A number of the Japanese soldiers convicted by American judges were hanged, while others received lengthy prison sentences or time in labor camps.

You can argue that the techniques used by Americans on detainees were necessary and, because of the OLC memos, legal. I would disagree with you, but you could plausibly make that argument. What you cannot do any longer is pretend that those techniques do not meet the definition of torture that America has used in the past.

Update: The state of American law on torture.