Blogs

Wall Street CEOs: Putting Shareholders Before Taxpayers

| Wed Feb. 11, 2009 5:07 PM EST

During Wednesday's hearing before the House Financial Services Committee, Citigroup chief executive Vikram Pandit offered a curious mea culpa in response to criticism triggered by his firm's plan to buy a new corporate jet after receiving $45 billion in bailout money:

We did not adjust quickly enough to this new world, and I take personal responsibility for that mistake. In the end, I canceled delivery. We need to do a better job of acknowledging and embracing the new realities.

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Bailout Question: Is This the Time for Mass Movements or Expert Opinion?

| Wed Feb. 11, 2009 4:45 PM EST

Nate Silver takes one side:

I'm sorry, but somewhere between 99.9% and 99.999999% of us are severely underqualified to be making policy recommendations on [the financial industry bailout]. And I'm certainly in the majority on this one... This is neither the time nor the place for mass movements -- this is the time for expert opinion. Once the experts (and I'm not one of them) have reached some kind of a consensus about what the best course of action is (and they haven't yet), then figure out who is impeding that action for political or other disingenuous reasons and tackle them -- do whatever you can to remove them from the playing field.

And David Sirota takes the other:

The big flaw in [Silver's] rationale, of course, is the entire concept of "expert opinion." What exactly is "expert opinion?" That term usually refers to the Very Serious People the Establishment and Media Say Are Experts - that is, people like the Wall Street CEOs in front of Congress and people like Larry Summers and Tim Geithner - all who had direct hands in destroying the economy. Silver - incredibly - would have us simply wait for this "expert opinion" to tell us what to do, without any regard for the fact that this "expert opinion" is exactly what got us into the situation we're in.

I think both Silver and Sirota are right, and wrong.

The Latest Obama Hope Poster News

| Wed Feb. 11, 2009 3:31 PM EST
It's been a busy couple of days on the Shepard Fairey iconic Obama Hope poster (IOHP) front. Some quick updates:

• Shepard Fairey got arrested in Boston. Yawn. Just the cost of doing business when you're a radical street artist sticking it to the Man.

• Mannie Garcia, the photographer who took the photo that Fairey used in the IOHP says he owns the image, not the Associated Press. And he doesn't care that Fairey used it. Garcia: "This is not just some artist who ripped something off. It’s more unique and more complicated than that. This is about the 44th President of the United States. I am not going to do anything to subvert this presidency.” Whoa—if Obama's success really does rest on the fate of this poster, we really are in trouble.

• And now Fairey is suing the AP. Fairey's lawyers say the IOHP was not a rip-off but rather a “stunning, abstracted and idealized visual image that created powerful new meaning."

The Small But Meaningful Victories of the Open Gov't World

| Wed Feb. 11, 2009 3:06 PM EST

I know what you're looking for on your lunch break: an update on Senate disclosure parity! The Sunlight Foundation reports that Sen. Russ Feingold's years-long, seemingly quixotic quest to cajole the Senate into filing campaign fundraising reports the same way as the House -- electronically and directly to the FEC -- may soon come to fruition. Feingold is expected to re-introduce S.223 in the next few weeks and enlarged Democratic majorities mean the greatest chance for passage yet. See Sunlight for more.

San Francisco Rejects American Apparel: Has the Fight Against Chain Stores Gone Too Far?

| Wed Feb. 11, 2009 2:51 PM EST

Last week, activists from the hippest street in San Francisco's uber-hip Mission neighborhood—where skinny pants and a shrunken American Apparel sweatshirt are like Polos and Dockers in Nantucket—successfully defeated American Apparel's application to open a store there. The backlash has been swift. Not less than three San Francisco Chronicle columnists weighed in, noting that American Apparel would have filled one of Valencia Street's 27 vacant storefronts with 15 employees earning $12 to $14 and hour plus healthcare—and during a recession! "American Apparel is lucky," sneered columnist Caille Millner. "What a burden it would be to have a store in a magical place with such nasty elves."

The elf in question is Chicken John Rinaldi, a performance artist, boat-maker, and 2007 San Francisco mayoral candidate (he got 2,500 votes) whose recent blog post inspired some 200 people to flood a planning commission meeting and buzz-saw the store's permit application like high school disciplinarians tackling an overgrown handlebar mustache. I spoke with Chicken John this morning as he was driving home from his art studio in Winters, California, (he can no longer afford to work in San Francisco) with his equally vocal best friend, Dammit the Amazing Wonder Dog.

 

Mother Jones:What happened?

Chicken John: We explained to American Apparel in no uncertian terms [that the store would never get approved], and I called their guy on the phone, and the guy was like this indignant fucker, like, "Yeah, we'll see. What you got?" And I was like, "Are you fucking kidding me? I eat guys like you for breakfast." [See American Apparel's response at bottom]

MJ: Clearly, a lot of people in the Mission oppose American Apparel coming in.

CJ: Let's not use the term "American Apparel" anymore. Let's use "Formula Retail." There's a lot of people in the Mission who oppose formula retail on Valencia Street. No one's saying that we oppose formula retail in the Mission. We just oppose it on eight blocks on Valencia Street. You want to put America Apparel [one block over] on Mission Street? I think that's a great idea.

MJ: What's wrong with Valencia Street in particular?

CJ: You want to put a chain store on the only eight blocks in America that don't have a chain store? If you can't see why that's wrong and bathed in vileness, then we're just going to have to agree to disagree. Like if you can't see that it's the last place that doesn't have a fucking Starbucks on it. Have you been to the rest of the country? It's out of control. There is no coffeeshop anymore. There is no diner.

MJ: There are other places in the city that don't have any chains.

CJ: Name one.

MJ: Hayes Valley has a rule against chains as well. But if you look at Hayes Valley, it's also full of stores selling $10,000 coats. Isn't that the issue, as opposed to whether the hipsters in the Mission, who already shop at American Apparel, are gonna have an America Apparel next to them or not?

Have You Ever Heard of Rep. Steve Austria (R-OH)?

| Wed Feb. 11, 2009 2:20 PM EST

Unless you have some sort of "giant idiot" section of your RSS reader, you probably haven't. Here's his attempt to deliver a Republican talking point:

"When (President Franklin) Roosevelt did this, he put our country into a Great Depression," Austria said. "He tried to borrow and spend, he tried to use the Keynesian approach, and our country ended up in a Great Depression. That's just history."

Actually, that's just wrong. If Austria is auditioning for "Are You Smarter Than a Fifth Grader," I have some advice for him. You're going to lose, chief. Any grade school kid knows that the stock market crash that precipitated the Great Depression occurred in 1929. The unfairly maligned Roosevelt took office in 1933.

My prediction? In 2060, Republicans will blame Barack Obama for overseeing the collapse of the American financial industry in the fall of 2008.

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Quote of the Day - 02.11.09

| Wed Feb. 11, 2009 2:01 PM EST | Scheduled to publish Wed Feb. 11, 2009 1:48 PM EST

QUOTE OF THE DAY....From Rep. Steve Austria (R–Ohio), explaining that FDR's deficit spending in 1933 was responsible for an event that began in 1929:

“When (President Franklin) Roosevelt did this, he put our country into a Great Depression. He tried to borrow and spend, he tried to use the Keynesian approach, and our country ended up in a Great Depression. That’s just history.”

Republicans really do have a unique definition of "history," don't they? Via Matt.

Valuing the Toxic Waste

| Wed Feb. 11, 2009 1:59 PM EST | Scheduled to publish Wed Feb. 11, 2009 1:38 PM EST

VALUING THE TOXIC WASTE....Part of the Geithner bank bailout plan is apparently a scheme to partner up with the private sector to buy up the toxic assets on bank balance sheets. Will this work? John Hempton thinks it might. Right now, he says, a lot of these assets are modestly underpriced by the market and might well make decent investment opportunities — but only if the feds provide enough low-priced leverage to turn a decent investment into a great one:

So how are those assets really? Underpriced but hardly exciting....No — to be exciting you need to borrow against them. You need to be able to use leverage. Cheap leverage. Lots of leverage. And it can’t be margin loans or the like — because the asset prices are so volatile that your funding might go away.

But — with permanent cheap funding at government rates it should be profitable to buy those assets. Seven to one levered at government rates (which are a couple of percent) the returns will be spectacular.

So if the Geithner plan is to attract say one hundred and fifty billion of private risk capital and allow it permanent and secure access to say a trillion dollars of government money at a government rates then hey — I am in. (I would require the interest rate risk be matched too.)

It would be a pretty big gift from the government — as nobody — a good bank or a bad bank — can borrow at the same (extraordinarily low) rate as the US Treasury. But as a plan it might just work. And because 150 billion of real private spondulicks is at risk there are some pretty strong incentives for the private sector manager to get it right.

Basically, the idea here is that private investors are better at ferreting out the true value of the toxic waste, while the feds are the ones with the money. And I guess maybe that makes some sense. But you still have a pretty serious problem on your hands: banks don't want to sell this stuff at honest prices. So even if you get both the valuation and the funding in place, how do you force banks to sell? And if you do force them to sell, are you just driving them into insolvency?

It's possible, I suppose, that this is the real point. Use private investors to figure out the valuation. Use the Fed's balance sheet to provide funding. Use Geithner's "stress test" to figure out which banks are bust, and force them to recognize the true value of their assets whether they sell them or not. Then let the private investors buy the junk and take over the remaining husk to be run as a nationalized bank.

But....if that's the plan, why not just nationalize in the first place, skip the process of valuing the junk, and set it aside to be sold off in a few years? And perhaps that's all this is: a piece of kabuki designed to get the private sector to make the determination that some of these banks are insolvent and have to be taken over. After all, if the private sector makes the valuation, no one can claim it was just some bureaucratic maneuver by a power-obsessed Obama administration.

Or something. Like everyone, I'm just guessing here.

Awards, Not Bonuses

| Wed Feb. 11, 2009 1:54 PM EST | Scheduled to publish Wed Feb. 11, 2009 1:08 PM EST

AWARDS, NOT BONUSES....What do two failed investment banks that have received $60 billion in federal bailout cash do when they merge? Pay their people more! Sam Stein reports:

The soon-to-be-merged financial giants — Morgan Stanley and Citigroup's Smith Barney — announced the payments during an internal conference call last week, but warned advisers against describing them in terms that would cause PR headaches.

"There will be a retention award. Please do not call it a bonus," said James Gorman, co-president of Morgan Stanley. "It is not a bonus. It is an award. And it recognizes the importance of keeping our team in place as we go through this integration."

Yeah, there's nothing more important than keeping all these folks in place. There are so many other lucrative opportunities for them in the rest of the financial industry, after all. Yeesh.

Fallen Soldiers

| Wed Feb. 11, 2009 1:53 PM EST | Scheduled to publish Wed Feb. 11, 2009 12:06 PM EST
FALLEN SOLDIERS....Following a question at Monday's press conference, the Obama administration is reviewing a longstanding policy that prevents the media from photographing flag-draped coffins being returned from war zones:

Defense Secretary Robert Gates suggested today that he was open to allowing the media to photograph the flag-draped coffins of fallen soldiers as their bodies and remains are returned to the United States.

"If the needs of the families can be met and the privacy concerns can be addressed, the more honor we can accord these fallen heroes, the better," Mr. Gates told reporters.

That's the right attitude. I've been in favor of allowing reporters to record the return of fallen soldiers for years, and the Bush administration stand on this never made any sense to me. Yes, of course the pictures could be used to stoke antiwar sentiment, but the same can be said for any war-related photography. At the same time, they can also do just the opposite. But in a democracy, this is all irrelevant anyway. These are American soldiers fighting an American war, and the American public has a right to see the price of that war. This is a policy that deserves to be overturned forthwith.