Stress Test Update

Stress test results are starting to leak:

Regulators have told Bank of America Corp. and Citigroup Inc. that the banks may need to raise more capital based on early results of the government's so-called stress tests of lenders, according to people familiar with the situation.

....Bank of America's capital hole as measured by the regulators is in the billions, said people close to the company....It isn't clear how big a capital deficit Citigroup faces.

Well, I'll bet that Citi's capital requirements are "in the billions" too.  What else would they be in, after all?

In any case, there's no way that either bank can raise private capital, and the Treasury has stated flatly that it won't allow them to fail.  That means either another big capital injection from the feds or else some kind of guarantee to private investors.  The former would almost certainly have to be at market rates (I doubt there's any appetite for more sweetheart deals) and the latter would be such a thin veneer that it's almost certainly impossible to pull off.  Especially in the case of Citi, then, it's hard to see how the government ends up anything other than a majority owner of the bank once this is all over.  Tim Geithner can call this anything he wants, but that's nationalization whether he likes it or not.

McCain's Curious Support for "Moving On"

In my blog post yesterday in which I pointed out that in 2007 John McCain was (correctly) telling people that we executed Japanese soldiers after WWII for waterboarding American POWs, I really should have pointed out that McCain has taken a look at the Bush Administration's actions, including waterboarding a detainee 183 times in a month, and has decided that instead of investigations or prosecutions, "we've got to move on."

Torturing Abu Zubaydah

In The One Percent Doctrine, Ron Suskind reported that CIA sources told him the waterboarding of al-Qaeda operative Abu Zubaydah had been worthless: Zubaydah coughed up reams of worthless intel under pressure but didn't provide anything genuinely valuable until an interrogator later got under his skin with some clever questioning.

But in December 2007, ABC's Brian Ross interviewed a CIA officer named John Kiriakou who told him just the opposite: according to Kiriakou, Zubaydah resisted waterboarding for "probably 30, 35 seconds" and the next day started providing information that "disrupted a number of attacks, maybe dozens of attacks."

My comment at the time: "Same guy. CIA sources for both accounts. But diametrically opposite conclusions. So who's right?"  Today, the New York Times revisits this episode in the wake of the torture memos released two weeks ago:

[Kiriakou's] claims — unverified at the time, but repeated by dozens of broadcasts, blogs and newspapers — have been sharply contradicted by a newly declassified Justice Department memo that said waterboarding had been used on Mr. Zubaydah “at least 83 times.”

....During the heated debate in 2007 over the use of waterboarding and other techniques, Mr. Kiriakou’s comments quickly ricocheted around the media. But lost in much of the coverage was the fact that Mr. Kiriakou had no firsthand knowledge of the waterboarding: He was not actually in the secret prison in Thailand where Mr. Zubaydah had been interrogated but in the C.I.A. headquarters in Northern Virginia. He learned about it only by reading accounts from the field.

....“It works, is the bottom line,” Rush Limbaugh exclaimed on his radio show the next day. “Thirty to 35 seconds, and it works.”  Mr. Kiriakou subsequently granted interviews to The Washington Post, The New York Times, National Public Radio, CBS, CNN, MSNBC and other media organizations. A CNN anchor called him “the man of the hour.”

....Mr. Kiriakou was the only on-the-record source cited by ABC. In the televised portion of the interview, Mr. Ross did not ask Mr. Kiriakou specifically about what kind of reports he was privy to or how long he had access to the information. “It didn’t even occur to me that they’d keep doing” the waterboarding, Mr. Ross said last week. “It doesn’t make any sense to me.”

He added, “I didn’t give enough credit to the fiendishness of the C.I.A.”

Kiriakou's testimony was immensely influential at the time, but it's pretty clear now that he was wrong: unless the CIA continued waterboarding him just for sport, Zubaydah didn't break after a single session.  Or ten sessions.  Or fifty.  And if Kiriakou was wrong about that, what are the odds that he was also wrong about the "dozens of attacks"?  Or about the fact that waterboarding was responsible for any actionable information at all?

Ron Suskind, on the other hand, hasn't been contradicted at all.  As near as I can tell, his reporting has stood up almost perfectly in the face of subsequent evidence.  If you want to know what really happened to Zubaydah, his book remains the gold standard for now.

Conservatives Think Colbert Is Serious

Via HuffPo comes a study that confirms one thing we already knew—Stephen Colbert is totally hilarious—but also points out something surprising: both conservatives and liberals think he's on their side. According to an Ohio State University study, The Colbert Report is like a political Rorschach text, and you see what you want to see in it:

...Individual-level political ideology significantly predicted perceptions of Colbert's political ideology. Additionally, there was no significant difference between the groups in thinking Colbert was funny, but conservatives were more likely to report that Colbert only pretends to be joking and genuinely meant what he said while liberals were more likely to report that Colbert used satire and was not serious when offering political statements. Conservatism also significantly predicted perceptions that Colbert disliked liberalism.

Proof that we live in different worlds came just last week when the National Organization for Marriage (nom nom nom!!) thanked Colbert for his parody of their insane "Gathering Storm" anti-gay marriage spot. NOM president Maggie Gallagher actually said "I've always thought Colbert was a double-agent, pretending to pretend to be a conservative, to pull one over Hollywood." Wow. Really? Well, I guess if you think gay marriage is a scary lightning storm, coming to take away your rights, your brain is full of neat ideas.

Bailout for Breakfast: GM Rolls Out New Plan

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.

Monday Top Five

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"

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

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.

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

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.)