Government-backed guarantees of financial assets carry "enormous risks" and created perverse incentives for businesses, but taxpayers will probably turn a profit from them, according to a report [PDF] released Friday by Elizabeth Warren's Congressional Oversight Panel (COP), which is charged with monitoring the bank bailouts. "At its high point, the federal government was guaranteeing or insuring $4.3 trillion in face value of financial assets" in the guarantee programs of the Federal Reserve, the FDIC, and the Treasury, according to a COP press release. That number means that guarantees were the "single largest element of the government's response to the financial crisis." 

By standing behind high-risk assets held by "potentially insolvent institutions," the panel said, the government was taking a huge risk. And the guarantees unquestionably distorted market behavior:

These guarantee programs also created significant moral hazard. Guarantees create price distortions and can lead market participants to engage in riskier behavior than they otherwise would. In addition to the explicit guarantees analyzed in the Panel's report, the government's broader economic stabilization effort may have signaled an implicit guarantee to the marketplace: the American taxpayer stands ready to provide a financial backstop for certain markets and large market players to avert possible economic collapse. To the degree that investors, lenders and borrowers believe that such an implicit guarantee remains in effect, moral hazard will continue to distort the market.

You can see this problem most clearly in the return of highly leveraged risk-taking and massive bonuses to Wall Street just months after the entire global economy nearly collapsed. Kevin Drum will have more on this in the next issue of the print magazine.

Don't Get Sick in Texas

The governor of Texas has an op-ed in the Washington Post today explaining why his state is a great model for healthcare reform?  Seriously?  That's like "letting Dick Fuld testify on the adequacy of self-regulation on Wall Street," says Ezra Klein.  I think he's being too kind.  Holy cow.

Corn To Weekly Standard: I Accept

Please, you can stop with those congratulatory emails, telephone calls, Facebook messages, tests, and Twitter DMs. I already realize that I have won the much-coveted award: the Weekly Standard's "Twitter of the Day." On a daily basis, the staff of that conservative magazine reviews tens of millions of Twitter messages—"tweets," for those in the know—in order to identify that one very special less-than-140-character message deserving of their notice. We salute them for this hard work. After all, it does entail much sacrifice. Were they not poring over all the world's Twitter feeds, they could be reporting on Dick Cheney's hourly observations regarding national security. Thankfully, Cheney has not yet begun to tweet—he's dithering on Twittering—for were he doing so, the rest of us would not stand a chance to win this particular prize.

What won the judges' fancy was this tweet of mine:

And hundreds of millions don't. RT @GOPLeader: AP: ‘Thousands rally’ to protest Pelosi #healthcare http://bit.ly/1JUFJP #Housecall #killbill

I was responding to a message that had been sent out minutes earlier by Republican House minority leader John Boehner, who was celebrating the arrival at the Capitol of thousands—yes, thousands!—of conservative citizens who were willing to yell and scream and hold signs of hate to beat back the emerging health care reform legislation.

The award citation, written by Michael Goldfarb (who last received attention in these digital pages for confusing disagreement with treason), was direct and simple in its reasoning:

Good point, Corn. Just like the hundreds of millions who didn't march on Washington for civil rights or to end the war in Vietnam. Or the hundreds of millions who didn't take to the streets to protest the Iraq war. Or the hundreds of millions who didn't vote for Barack Obama. The silent majority strikes again!

Who knew that Goldfarb could perform such an exquisite imitation of Stephen Colbert? His portrayal of a right-wing fan of twisted logic, who is unable to discern the purposeful excess of my winning Twitter message, was spot-on. (Hooray for you, sir.) Of course, just such a person would suggest that the presence of a few thousand angry conservatives trumps the massive electoral majority assembled by President Obama in last year's election. And just such a person would also ignore the inconvenient fact that both houses of Congress are controlled by sizable Democratic majorities that were placed there by millions throughout the land. And just such a person would most certainly claim, all evidence to the contrary, that the thousands who were bused by conservative outfits to this mid-day gathering represent the true majority of this great country.

Given Goldfarb's bravura performance—inspired by my few meager words—I can only humbly say one thing: I accept.

You can follow David Corn's postings and media appearances via Twitter—as Michael Goldfarb knows.

Letter From Fort Hood

A former reader emails today to pass along a firsthand account of the shooting at Fort Hood on Thursday. It's unedited except for paragraph breaks:

I was walking into the medical SRP building when he started firing (he never made it to the main SRP building....the media accounts are understandably pretty off right now).  He was calmly and methodically shooting everyone.  Like every non-deployed military post, no one was armed.  For the first time in my life I really wish I had a weapon.  I don't know how to explain what it feels like to have someone shoot at you while you're unarmed.  He missed me but didn't miss a lot of others.  Just pure random luck.  It's a very compressed area, thus the numbers.

I saw a lot of heroism.  So many more would have died if this wasn't an Army post.  We're almost all CLS trained and it made a huge difference. Cause the EMTs didn't get there for almost an hour (they thought there was a second shooter).  I just can't believe one of our own shot us.  When I saw his ID card I couldn't believe it.  After he shot the female police officer he was fumbling his reload and I saw the other police officer around the corner and yelled at him to come shoot the shooter.  He did.   Then I used my belt as a tourniquet on the female officer.

I hate to tell you this but in the course of the day it became clear that it was another Akbar incident.1  (Once they convinced them the blood drenching my clothes wasn't mine I spent the day being interviewed by the alphabet.) Akbar again.  God help us.  He was very planned.  I counted three full mags around him (I secured his weapon for a while).  Found out later that his car was filled with more ammo.

This was premeditated.  This wasn't VBC again.  That guy snapped, not this one.  He was so damn calm when he was shooting.  Methodical.  And he was moving tactically.  The Army really is diverse and we really do love all our own.  We signed up to be shot at but not at home.  Not unarmed.  No one should ever see what the inside of that medical SRP building looked like.  I suppose that's what VA Tech looked like.  Except they didn't have soldiers coming from everywhere to tourniquet and compress and talk to the wounded while rounds are still coming out.

No one touched him...the shooter that is...other than to treat him.  Though I told the medic (and I'm not proud of this) that was giving him plasma that there better not be anyone else who needed it because he should be the last one to be treated.  But I had just finished holding a soldier who was critical (I counted three entry wounds) and talking to him about his children....  If the shooter had a grievance he should have taken it out on those responsible; he wasn't shooting people he knew (media reports to the contrary).  He was just shooting anybody who happened to be present for SRP medical processing, mainly lower enlisted.

But please, no one use this politically!   The Army is not "broken", PTSD doesn't turn people into killers, most Muslims aren't evil, and whether we should stay or go in Afghanistan has nothing to do with this.  I'm babbling...sorry.

1Hasan Akbar was an Army sergeant who killed two soldiers and wounded 14 others in a grenade attack in Kuwait in 2003.  He's currently under a sentence of death.

There have been several media reports that the Fort Hood shooter yelled "Allahu Akbar!" during his rampage, but my correspondent says, "He was silent in my presence."

Climate Bill: Friend or FOE?

Most of the big environmental groups are cheering the advancement of climate legislation out of the Environment and Public Works Committee on Thursday, but the farther-left environmental groups are still not happy with the bill.

Laudatory responses came almost immediately from Sierra Club, National Wildlife Federation, Environmental Defense Fund, and the Natural Resources Defense Council, to name a few. But Friends of the Earth—which along with Greenpeace was the only major green group to oppose the House climate legislation—blasted the bill as "a woefully disproportionate response to the tremendous economic, security and public health threats posed by global warming."

"It is extremely disconcerting to hear scientists speak about the level of action needed to prevent radical and dangerous climate destabilization, and then to see how far short even one of the most environmentally friendly committees in Congress has fallen," said Friends of the Earth President Erich Pica in a statement.

While some portions of the bill have been improved over the House bill, Friends of the Earth identified a number of concerns: "a poorly regulated carbon trading scheme," an allocation system that "showers polluting corporations with billions of dollars" without requiring stringent carbon reductions, and "massive carbon offset loophole."

"These flaws are unacceptable, and they are the result of a defective political system in which polluting corporations, Wall Street traders, and their lobbyists continue to exert far too much influence," Pica's statement said. And Pica said the negotiating effort by John Kerry (D-Mass.), Lindsey Graham (R-S.C.) and Joe Lieberman (I-Conn.) appeared "to be moving forward with an attempt to produce an even weaker bill—one friendlier to the oil, coal and nuclear industries."

 

Need To Read: November 6, 2009

Today's must reads:

Get more stuff like this: Follow me on twitter! David Corn, Mother Jones' DC bureau chief, also tweets, as does MoJo blogger Kate Sheppard. So do my colleagues Daniel Schulman and Rachel Morris and our editors-in-chief, Clara Jeffery and Monika Bauerlein. Follow them, too! (The magazine's main account is @motherjones.)

Taking Governance Seriously

Congress passed something today.  Hooray!

Congress gave final approval Thursday for an additional $24 billion to help the jobless and support the housing market as climbing unemployment poses a growing liability for elected officials.

The bill, passed overwhelmingly by the House and headed to President Obama for his signature Friday, extends unemployment nsurance benefits that were due to expire and renews an $8,000 tax credit for first-time home buyers, while also expanding it to cover many other home purchases.

And Democrats only had to break three separate filibusters in the Senate to get this passed!  The first filibuster was broken by a vote of 87-13, the second by a vote of 85-2, and the third by a vote of 97-1.  The fourth and final vote, the one to actually pass the bill, was 98-0.  Elapsed time: five weeks for a bill that everyone ended up voting for.

Why?  Because even though Republicans were allowed to tack on a tax cut to the bill as the price of getting it passed, they decided to filibuster anyway unless they were also allowed to include an anti-ACORN amendment.  Seriously.  A bit of ACORN blustering to satisfy the Palin-Beck crowd is the reason they held up a bill designed to help people who are out of work in the deepest recession since World War II.  Details here and here.  That's called taking governing seriously, my friends.

How to Bust an Escalator Addiction

The Fun Theory is, well, fun. I know this video made my rounds a couple of weeks ago, but not here (I don't think). For the students I met at Augustana College earlier this year, wrestling with their elevator addictions, this video offers a cool solution. I believe this is another example of the piezo-electric effect, powered by human feet, appearing in nightclubs in Europe.

 

Ft. Hood Massacre

Mass murder at Ft. Hood:

Twelve people have been killed and 31 wounded in a shooting spree at a Texas military base by what officials believe was possibly carried out by an Army officer. The suspected gunman was identified by ABC News as Major Malik Nadal Hasan.

The shooter was killed and two other suspects, who are also soldiers, have been apprehended, Lt. Gen. Robert W. Cone said.

Oh Lord.  This is very, very bad.  And it's going to get worse.