Obama aimed for the auto bailout sweet spot. Did he hit it?

President Obama's plan for the auto companies boils down to this: GM must get serious about streamlining itself -- after months of dawdling in hopes of a more generous bailout -- or face a structured bankruptcy; and Chrysler cannot count on any more federal aid unless it quickly merges with or sells itself to Fiat, the only automobile company interested in partnering with Detroit's third-place maker.

Chrysler was given 30 days but has wasted no time, as this report of a new partnership with Fiat formed on the same say as Obama's announcement shows.

GM can now see the handwriting on the wall clearly. The company's new CEO said Tuesday that bankruptcy by the end of the 60 days the President gave GM to get its house in order is now "certainly more probable." The United Auto Workers, which has stalled and waffled and only reluctantly made some concessions -- in the expectation that Democrats would stave off the inevitable -- now finally must face the inevitable with a hard deadline.

I argued back in November when the initial auto bailout proposal came up that a bailout was necessary, particularly of GM, for the sake of the wider economy, even though Detroit's repeated failures are infuriating. I also said that such a bailout "should be approached as if it were a Chapter 11 bankruptcy restructuring, with a special federal official...much like a bankruptcy judge, given wide latitude to force the companies and their employees' unions to downsize, reshape cost structures, and focus on a return to profitable operations." I think that's subtantively pretty much what Obama has done. We will see soon enough.

However, his forcing out of GM's long-time CEO, Rick Wagoner, may prove to be a mistake. I understand why he did it; with public anger at Wall Street big shots unabated and polls showing that big majorities of 10 Americans oppose the auto bailouts, he had to do something dramatic to hold GM and its management responsible in a highly visible way.

The trouble is that Wagoner's ouster sets the perception in concrete that the Obama Administration is now running GM and responsible for the outcome, whatever it may be. We can be sure that the UAW is not going down without fighting another round -- and that could mean mobilizing friendly Democrats and other unions to pressure Obama and Congress to go soft on what needs to be done at GM. If they succeed and Obama caves, it could mean very substantial additional sums of taxpayers' money funneled into GM while it still doesn't make itself fully competitive.

I hope that won't happen. Sp far, Obama is on the right track but needs to stay on it.

What do you think? Post a comment.

Report: Federal prosecutors probing Joseph Cassano, the guy who blew up A.I.G.

Peek-a-boo, Joe. Maybe we'll see you in court.

ABC News has this report, calculated to make every recession-weary American juts a little more cheerful today:

The FBI and federal prosecutors are reportedly closing in on the AIG executive whose suspect investments cost the insurance giant hundreds of billions of dollars. The government is investigating whether or not 54-year old Brooklyn-native Joseph Cassano committed criminal fraud in virtually bankrupting the company.

Cassano is the guy who headed A.I.G.'s now-infamous Financial Products Division, the "casino" built on top of an otherwise prosaic insurance company that issued a gazillion dollars of "insurance" in the form of so-called credit default swaps on so many of those toxic assets that are dragging the global financial system down and the economy with it. A.I.G.'s insurance made these assets easily marketable, so that they wound up poisoning the portfolios of a host of major financial institutions.

"He almost single-handedly is responsible for bringing AIG down and by reference the economy of this country," said Rep. Jackie Speier (D-Ca.)

(snip)

"He is the golden boy of the casino," said Rep. Speier. "They basically took peoples' hard earned money and threw it away, gambled it and lost everything. And he must be held accountable for the fraud, for the dereliction of his duty, and for the havoc that he's wrought on America."

(snip)

"AIG was insuring junk and it was the AIG insurance that made the junk marketable," said tax law expert Jack Blum. "American taxpayers have been put on the hook for this insurance junk."

Even as the bad loans began to emerge, Cassano boasted to Wall Street analysts that his transactions, called credit default swaps, were foolproof.

(snip)

An ABC News investigation found that Cassano set up some dozens of separate companies, some off-shore, to handle the transactions, effectively keeping them off the books of AIG and out of sight of regulators in the U.S. and the United Kingdom.

"This is the other very important issue underneath the AIG scandal," said Blum. "All of these contracts were moved offshore for the express purpose of getting out from under regulation and tax evasion."

Cassano "earned" more than $300 million in the process of destroying A.I.G., and he's kept every nickel of it.

It's possible that everything Cassano did was legal -- although it certainly should not have been. But business fraud, tax evasion or accounting shenanigans are often part and parcel of high stakes business gambling of the kind Cassano excelled at. It would be a small but sweet satisfaction to see this wise guy indicted.

The Cassano-Chris Dodd Connection

Cassano is also the news today for his role in collecting $162,000 in contributions from A.I.G. executives to the campaign chest of Senator Christopher Dodd (D., CT). Cassano pulled in the dough in just six weeks by leaning on his Financial Products Division cohorts and their spouses to each give Dodd $2,100 for the primary and another $2,100 for the general election. In a November 17, 2006, e-mail, he made a flat out pitch for the money because Dodd was "next in line" (when the Democrats gained control of the Senate in the 2006 election) to chair the Senate Banking Committee, with its key role in overseeing A.I.G.'s business. Cassano pointed out that Dodd would "have the opportunity to set the committee's agenda on issues critical to the financial services industry."

Dodd quickly transferred the A.I.G. cash to his 2008 Presidential campaign committee to help him get his ultimately lame national bid off the ground. In his email, Cassano was understanding about this, writing, "As he considers running for president in 2008, Senator Dodd has asked us for our support with his reelection campaign and we have offered to be supportive."

Nice. Let's hope Dodd pays a price for his connivance with this leech.

What do you think about Cassano's role at A.I.G. and the Dodd connection? Post a comment.

Obama's Afghan strategy: Middle ground or all-out commitment?

As President Obama completed his review of the Afghan war and announced a new strategy, many reports emphasized that he had chosen a "middle course." For example, Politico wrote:

The Obama administration fears getting bogged down in a bloody and inconclusive war in Afghanistan and Pakistan — but it also fears walking away from the region. So its new strategy, which President Barack Obama announced Friday at the White House, is a careful middle course that seeks to avoid both of these unacceptable outcomes. It keeps the U.S. committed but not too committed.

The New York Times conveyed the same sense of a balanced or middle course this way:

But President Obama promised neither to write a “blank check” nor to “blindly stay the course” if his risky new strategy, which includes the addition of 4,000 troops in a training role and several benchmarks for judging progress, does not achieve its ambitious goals.

Quite a few stories made much of the fact that Obama's February authorization of 17,000 more combat troops and announcement today of 4,000 more to serve as "trainers" for the Afghan army fell short of the 30,000 that commanders on the ground wanted. There also were ominous mentions of more full-blown counter-insurgency -- a path that presumably would require many more troops -- as a a strategic alternative that Obama had rejected.

But are Obama's plans really a "middle ground" and if so, between what and what?

The 17,000 troops approved last month were identified for the deployment because of their availability, given other Army and Marine Corps needs, before his inauguration, but the decision to commit more troops was deferred to him. Even so, the first of these combat forces won't arrive in theater for some time, and the full complement may not be in position before late summer. There are logistical and other limits on moving larger forces into the theater. Even if he did not need more time, Obama has another several months before the additional troops requested by the commanders would become available, and the earliest they could be deployed in Afghanistan might be the fall.

On numbers of troops, therefore, Obama has committed all the troops currently available to be committed. He has not held back. It should be easy to recall that the U.S. has been trying for many months to secure added troop commitments from NATO allies for this very reason. The Taliban is gaining strength and expected to launch another warm weather offensive soon, and the U.S. is short of manpower.

As for all the other aspects of a strategy that one might call an all-out effort, Obama's plan has all of them:

-- A major increase in non-military aid aimed at what as denigrated a short while ago as "nation building." Check.

-- Pressure (with success assessed through "benchmarks") on the Afghan central government to fight corruption, curb the drug trade and share more power with dependable regional and local leaders. Check.

-- A major increase in the size and strength of the Afghan National Army with the training resources and money to make that possible. Check.

-- Pressure on Pakistan to increase its cooperation in the fight against the Taliban and al Qaeda on both sides of the border. Check.

-- Increased aid to Pakistan. Check.

-- Continuation of U.S. strikes inside Pakistan on al Qaeda and Taliban targets. Check.

-- Some as yet ill-defined effort to drive wedges into the Taliban and peel off some of its support.
Sounds less like a middle ground and more like the maximum effort that could be made at this time no matter who is President. Indeed, I'm sure President McCain could not and would not have done more. That's why, Obama is already getting flak from the old new left. Watch for significant parts of the left wing of his own party to gradually move into the anti-war camp. This is why Obama stressed again and again today that the overriding goal of this war is to get al Qaeda. It's a lot harder for anyone to argue with that.

This Washington Times story about the review and Obama's decision may have the most accurate take:

On the one side [of the internal debate] were Vice President Joseph R. Biden Jr. and Deputy Secretary of State James B. Steinberg, who argued in closed-door meetings for a minimal strategy of stabilizing Afghanistan that one source described as a "lowest common denominator" approach.

The goal of these advocates was to limit civilian and other nonmilitary efforts in Afghanistan and focus on a main military objective of denying safe haven to the Taliban and al Qaeda terrorists.

The other side of the debate was led by Richard C. Holbrooke, the special envoy for the region, who along with U.S. Central Command leader Gen. David H. Petraeus and Secretary of State Hillary Rodham Clinton fought for a major nation-building effort.

The Holbrooke-Petraeus-Clinton faction, according to the sources, prevailed. The result is expected to be a major, long-term military and civilian program to reinvent Afghanistan from one of the most backward, least developed nations to a relatively prosperous democratic state.

What are your thoughts about the new Obama strategy? Post a comment.

At first-ever Presidential online townhall, Obama is pulled down into the weed

"Mr. President...uh...Mr....uh...(snort)...?"

So President Obama gave a boost to the "new media" and reached out to let ordinary Americans have a chance to pitch questions at him, and what did they ask about? The recession? Joblessness? The banking crisis? Poverty? Healthcare? War? Terrorism? Iran? Iraq? North Korea? Violence in Mexico?

No less than 92,000 of the usually shut-out little people asked the President of the United States about weed, grass, herb, reefer, pot, ganja -- frigging marijuana!

Politico has the details:

Given the opportunity to say what’s really on their minds without going through the filter of the mainstream media, people “buzzed up” a series of questions that seemed to suggest broad interest in legalizing marijuana and taxing it.

In this moment of national economic crisis, the top four questions under the heading of “Financial security” concerned marijuana; on the budget, people voted up questions about marijuana to positions 1-4; marijuana was in the first and third positions under “jobs”; people boosted a plug for legalizing marijuana to No. 2 under “health care reform.” And questions about decriminalizing pot occupied spots 1 and 2 under “green jobs and energy.”

After taking questions lower on the list, Obama addressed the pot issue head-on, noting the huge number of questions about marijuana legalization and remarking with a chuckle, “I don't know what that says about the online audience."

"The answer is no, I don't think that is a good strategy to grow our economy," he said, as the audience in the room applauded and joined him in a laugh.

The deluge of questions concerning Mary Jane didn't just happen:

It seems part of the popularity of marijuana questions was fueled by NORML, the National Organization for the Reform of Marijuana Laws, which was urging its members to vote for questions supporting the legalization of cannabis.

Apart from making Americans look like a bunch of dope fiends with nothing better to do than pester the President about their personal indulgences, this organized channeling of questions will make it harder for Obama to do the online townhall thing again without a lot more structure and maybe less transparency about the Q&A. After all, should he really expose himself to a barrage of ginned-up questions about this or that group's pet peeve? I don't think so.

What do you think? Post a comment.

CIA expert: Most electronic voting systems are not secure

Voters need to worry about the hackers behind the screen?

(Hat tip: Instapundit)

CIA cybersecurity expert Steve Stigall testified to the federal Election Assistance Commission last month that computerized voting systems can be manipulated in a host of ways from altering voter registration lists to the posting of balloting results. The CIA undertook a study of the systems a few years ago as it looked into the legitimacy of elections in Venezuela, Macedonia, Ukraine and other nations and also to better understand whether foreigners might try to hack U.S. election systems:

Stigall said that voting equipment connected to the Internet could be hacked, and machines that weren't connected could be compromised wirelessly. Eleven U.S. states have banned or limited wireless capability in voting equipment, but Stigall said that election officials didn't always know it when wireless cards were embedded in their machines.

While Stigall said that he wasn't speaking for the CIA and wouldn't address U.S. voting systems, his presentation appeared to undercut calls by some U.S. politicians to shift to Internet balloting, at least for military personnel and other American citizens living overseas. Stigall said that most Web-based ballot systems had proved to be insecure.

The commission has been criticized for giving states more than $1 billion to buy electronic equipment without first setting performance standards. Numerous computer-security experts have concluded that U.S. systems can be hacked, and allegations of tampering in Ohio, Florida and other swing states have triggered a campaign to require all voting machines to produce paper audit trails.

(snip)

In the former Soviet republic of Georgia, Stigall said, hackers took resurrecting the dead to "a new art form" by adding the names of people who'd died in the 18th century to computerized voter-registration lists. Macedonia was accused of "voter genocide" because the names of so many Albanians living in the country were eradicated from the computerized lists, Stigall said.

He said that elections also could be manipulated when votes were cast, when ballots were moved or transmitted to central collection points, when official results were tabulated and when the totals were posted on the Internet.

Nothing is likely to be more destructive to our civil society than the specter of voting fraud or even ambiguity surrounding the results of an important election decided by a handful of votes out of millions cast. Of course, there is no voting system that can perform so perfectly that a razor-thin outcome won't give rise to a legal scrum such as we saw in Florida in 2000 or the one now in its fifth month in Minnesota. Even if election officials are both 100% trustworthy and super-competent, some voters will screw up their ballots.

But we don't need to add to the potential for questionable outcomes and bet our democracy on new systems that may not be secure -- or even systems that don't inspire the voters' confidence. We have enough troubles.

What's your opinion of computerized voting -- and its logical extension, Internet voting? Post a comment.

AIG $1-million bonus exec: "I'm not guilty of anything, and I quit."

I was as angry as anyone about the A.I.G. "retention bonuses," although I also commented that Congress was acting like an out-of-control mob and pointed out that recycling bailout cash into campaign contributions should excite as much outrage as the bonuses did.

Today, Jake DeSantis, a high-level executive in A.I.G.'s Financial Products unit, from whence the economy-destroying credit default swaps came, has a op-ed in The New York Times -- actually his resignation letter to A.I.G. CEO Edward Liddy. Everyone concerned about the bonus issue owes it to themselves to read all of DeSantis's piece.

In brief, he writes that: his job at A.I.G. had nothing to do with the swaps or any other aspect of the business that imploded; his work returned handsome profits; the people responsible for the offending swaps are long gone from the company; he and others in the Financial Products unit agreed a year ago in exchange for the contracted bonus payments to stay on and work long hours to help rescue company's remaining assets, in part, so A.I.G. could pay back the taxpayers; he personally was asked to stay and work for a salary of a dollar a year, with the prospect of the big bonus as his compensation; the company and Liddy assured DeSantis and his colleagues on numerous occasions that the company would honor its commitments to them and stand behind them.

Despite all that, Congress, the media and two state attorneys general bellowed and threatened, Liddy caved, and everyone wants DeSantis to return the money or pay the penalty of "exposure" in a heated atmosphere. DeSantis is resigning instead, seeing no further reason to keep working 14-hour days. He's pledging to pay the after-tax portion of his bonus -- whatever that works out to be after Congress is through -- to charities that help people hurt by the economic downturn.

Assuming what he says is true, the guy makes a good case for himself, and I don't blame him for quitting. I still believe there should not have been any room for bonuses in a company that has swallowed $170 billion of our money to avert bankruptcy. On the other hand, this should have been made clear long ago and more appropriate forms and levels of compensation worked out. Stringing people like DeSantis along so he works for a year and then gets smacked by the government is simply wrong.

What do you think? Post a comment.

Boosted by MSNBC's Rachel Maddow, left launches campaign against moderate Democrats, calling them "Conservadems"

What are these people thinking?

With MSNBC host Rachel Maddow beating the drum for them, self-styled "progressives" have launched a campaign to beat up on moderate Democrats, newly dubbed "Conservadems." The main targets appear to be Indiana Sen. Evan Bayh -- who just last year was among Barack Obama's final three picks for VP -- and the 15 Democratic Senators Bayh has pulled together in a new centrist caucus. Also in their sights are the 49 House Democrats who make up the Blue Dog Coalition .

The "Dog the (Blue) Dogs" campaign is spearheaded by The Campaign for America’s Future, which bills itself as "the strategy center for the progressive movement" and USAction, a union-supported outfit that claims to build grassroots campaigns. Naturally, left-leaning blogs like firedoglake, digby and Crooks and Liars -- who have a penchant for forming circular firing squads -- are taking up the new cause with a vengeance.

These "progressives" are not content to take these moderate Democrats to task on the merits of their positions, which generally lean toward prudence in taxation and fiscal policy. They prefer to try to delegitimize them as Democrats with the label "Conservadems," lump them together with the most right-wing Republicans, and revile them for the crime of reflecting the moderate voters in their states -- states like Indiana, Missouri, Wisconsin, Colorado, North Carolina, Virginia and West Virginia that provided the swing votes to elect a Democratic President and return big Democratic majorities to Congress last November.

One blogger calls them "right-leaning conservative Democrats," no less (shades of Senator Bilbo!), and has this to say:

Bayh's bloc's agenda is to eviscerate Obama's agenda in order to prevent healthcare reform and climate change policies. The Democrats willing to admit to being part of this new anti-Obama bloc are all the usual suspects, the conservatives with shit voting records who seem always eager to show the folks back home how much they detest working families and how dependable they are when it comes to denying the aspirations of ordinary Americans.

These juvenile taunts about being right-wingers out to obstruct Obama's wise plans don't hold up under scrutiny. If you look at a few relevant facts, they turn out to be pure rubbish.

Every year, that granddaddy of liberal groups, Americans for Democratic Action, puts out scores to indicate how liberal or conservative every member of Congress is, based on their voting records. ADA uses votes on 20 actions dealing with a wide range of issues. A perfect liberal score is 100%.

For the 2008 session, the average score for Senate Democrats was 90% (by contrast, the average score for Senate Republicans was 20%). Only 16 Democrats got a perfect 100%.

Here are the scores of the members of the new moderate Senate caucus that these "progressives" would have you believe is a nest of reactionaries: Evan Bayh, 70%; Blanche Lincoln, 80%; Mark Pryor, 85%; Joe Lieberman, 85%; Robert Byrd, 55%; Mary Landrieu, 65%; Carl Levin, 100%; Herb Kohl 95%; Bob Casey, 90%; Kent Conrad, 90%; Claire McCaskill, 80%; Bill Nelson, 95%; and Ben Nelson, 75%. The rest are new members elected in 2008 or appointed since the election.

So we have a group that ranges from 55% to 100% with no one even close to the average of 20% for the Republicans. Looks like a moderate to liberal bunch to me.

The obvious truth that somehow evades these well-meaning but dopey folks is that, without the 15 Democrats who comprise the centrist caucus, there would be only 44 Democrats in the Senate. The moderates have won...duh...because they're moderates! Among the newbies in the Bayh caucus are Warner in Virginia, Shaheen in New Hampshire, Hagan in North Carolina, Udall and Bennet in Colorado, and Begich in Alaska. If these Senators all toed the "progressive" line, is there anyone who really believes they would all be Senators?

Get real, people. Obama is going to have to compromise a great deal to pass his programs. As Chairman of the Senate Budget Committee, Senator Conrad -- a moderate with a 90% ADA rating -- is already out with his five-year spending plan that would drastically cut back on Obama's ambitious budget to bring the huge projected deficits under some semblance of control.

That's not "un-progressive" of him. He's concerned about the damaging inflation that would follow on the heels of the recession and the depressing effect of inevitable tax increases on economic growth. Slow growth and high inflation emphatically are not good for the working families that "progressives" claim to represent. Bayh, Conrad and others are just as concerned about those families as are the bloggers at FDL and handsomely paid talk show hosts.

What do you think? Post a comment.

Federal regulation of non-bank financial companies is needed -- but not by the Treasury Department

President Obama and Treasury Secretary Obama want Congress to give the Treasury Department "unprecedented powers" to regulate and even "to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy." The Secretary of the Treasury would "exercise the new powers in consultation with the White House, the Federal Reserve and other regulators."

The new plan would give the government authority -- similar to that long held over banks by the Federal Deposit Insurance Corporation (FDIC) -- to regulate big financial institutions that are not traditional banks but can have just as much of an impact as banks on the financial system. It responds to the experience of the past year when troubles at the investment firm, Lehman Brothers, and the insurance giant, A.I.G., played a key role in the financial meltdown.

There is a major difference, though. The FDIC, which has an outstanding record since 1933 of effectively safeguarding the public and depositors' interest while minimizing disruptions to the banking system, is an independent federal agency. It is funded by premiums paid by the regulated banks to insure their deposits and managed by a five-person board of directors that cannot include more than three members from one political party. The directors are appointed by the President and confirmed by the Senate but serve for fixed terms. The FDIC's relative institutional independence -- of both Congress and the President -- guarantees it a substantial measure of independence from politics and prevents it from being whip-sawed by politically-driven outbursts of irresponsibility such as we saw last week in the House of Representatives over the A.I.G. mess.

After the harrowing financial collapse of the past six months and the huge costs to the taxpayers of the bailouts, there is no question that the federal government needs to be able to regulate financial institutions of all kinds in the public interest. And perhaps Obama and Geithner would handle the expanded authority well. In adopting sweeping changes in the law, however, we need to be careful and take the long view of how such power will be exercised for years, even decades.

Since banks are regulated by independent agencies like the FDIC, I see no reason why non-banks should be regulated by the Treasury Department, with all the exposure to political influences that entails. Let's vest the new authority in an agency structured like the FDIC -- perhaps by expanding and redefining the mission of the FDIC itself.

What's your opinion about expanded regulatory authority? Post a comment.

Poll: Two-thirds of American say pols who got campaign contributions from A.I.G. should return the money

I posted here yesterday about a report that federal bailout money was being recycled into campaign contributions to some of the very politicians who control the bailouts and grandstanded against the A.I.G. and other bonuses.

According to a new Rasmussen poll, 67% of Americans believe that candidates who got such contributions from A.I.G. should return the money.

Rasmussen has begun separately polling "Mainstream" or "Populist" Americans, a group it says comprises 75% of the population, and a smaller "Political Class." On the A.I.G. campaign cash, it finds that big majorities of Mainstreamers of all political persuasions want the money returned -- 74% of Democrats, 78% of Republicans and 78% of independents. But among the elite Political Class, only 29% think the contributions should be returned, while 63% don't.

The table above from the Center for Responsive Politics shows the top 10 recipients of campaign cash from A.I.G. or its employees during the 2008 election cycle. The Center also totalled up contributions going back to 1990. Chris Dodd (D.-CT), who chairs the Senate Banking Committee, scored the most from A.I.G. over that period -- $280,000. Senator Chuck Schumer (D.-NY), who was among those denouncing the AIG bonuses last week, came in second with $112,000. Topping the list of Republican recipients for that 18-year period was former President Bush, who got a total of $200,000. The 2008 GOP Presidential candidate, Senator John McCain of Arizona, was second on GOP list, with $99,000.

With all that dough at stake, it's easy to see why most members of Rasmussen's Political Class don't agree with the Mainstream that the money should be returned. So paying bonuses to employees is an abomination requiring frantic and harsh Congressional action to force repayment or to recoup the money. But campaign contributions, that's a whole different story!

Got a opinion? Post a comment.

The incredible vanishing Governor: David Paterson's approval rating plummets to 19%

"Hello, hello, is anybody there? I need help fast!"

A couple of weeks ago, when New York Governor David Paterson's approval rating in one poll had plunged to a low of 26%, I wrote that he still had about 10 months to show some stuff and launch a comeback. Now, in the latest Siena poll, a mere 19% -- yes, nineteen percent -- of voters think Paterson is doing a good job as Governor. When you've fallen so fast -- from 51% two months ago -- and you're so ridiculously far down a year away from the start of your election campaign, it's getting hard to see how you can recover.

Paterson badly needs to get his own house in order by staffing up with the best people and mounting an effective political operation, but numbers like these will make it harder for him to attract and hold the staffers, political supporters and contributors he badly needs. And his sub-basement numbers will encourage his likely primary and election opponents to gear up early for their own campaigns. If I were state Attorney General Andrew Cuomo, I'd start raising money (which can be spent in either an AG or a gubernatorial campaign) and lining up political support like crazy in the hope that Paterson won't run. Cuomo could do so without ever saying he planned to challenge the state's first African-American Governor.

Anyway, Siena found that Cuomo was beating Paterson 52% to 22% among Black voters in a potential 2010 primary! Among all Democratic voters, Cuomo would beat Paterson 67% to 17%. And while Paterson would lose overwhelmingly to Rudy Giuliani, a possible GOP candidate, Cuomo leads Rudy by a healthy 10%.

Governor: You need a short-term plan to boost that job approval rating up above 30% in the next few months, or you can fuggetaboutit.

Any other opinions for the Governor? Post a comment.

Interesting stuff on the Web - 3/23/09

As debate about card check heats up, the pro-labor Right Democrat spotlights a study showing unionized companies are no more likely to go out of business than non-union companies. That's what I thought, too, although it begs the question of business success and growth.

Meanwhile, Starbucks, Whole Foods and Costco have teamed up to propose a "third way" on card check, presumably for nice, progressive employees to embrace. So where are Ben & Jerry?

Outside the Beltway blogger Alex Knapp zaps the "Tea Party" movement for not holding tea parties earlier to protest other stuff going on like, say, the war. Point taken, but shouldn't Knapp have organized his own tea parties or whatever? Rightie bloggers fire back.

Think Progress reports on one Tea Party where folks carried signs reading, "Obama bin-Lyin'-Impeach Now!" Someone should tell them why this is really rotten business.

Re: Obama -- There's doom on the right and gloom on the left. So does this mean that Obama is on a sensible middle track or so far off the track that he's getting everybody upset?

A Drudge-Politico conspiracy to gang up on Obama in order to get hits? That's basically John Cook's take at Gawker. I think all pols, including Obama, are just going to have to deal with minute-by-minute reporting of minutiae, since that's what the net and cable do.

AmbivaBlog notes how creatively advertisers have taken to deploying "stimulus" and "bailout."

It's been a whole four months since November and most of us have forgotten about the Electoral College, but Below the Beltway reminds us why a reform/change might be a good idea.

How the big economic meltdown happened

Click on image to enlarge

(Hat tip: Le-gal In-sur-rec-tion)

It's not easy to visualize the many inter-related contributors to the 2008 financial crisis. The graphic reproduced here pulls it together nicely in a single picture (no editorial endorsement of that particular picture by The Purple Center implied).

There are many more useful graphics where this one came from -- here.

With Obama's backing, CIA-operated drones knocking hell out of al Qaeda in Pakistan

MQ-9 "Reaper" above and MQ-1 "Predator" drones carry Hellfire missiles

As President Obama winds up his review of the "AfPak" war and preparing to announce new steps in that conflict later this week, it's already clear that his Administration is continuing the heavy and highly effective use of drone-launched missile attacks on key al Qaeda and Taliban targets inside Pakistan. The CIA-run attacks, authorized last August by President Bush, are taking a heavy toll on terrorists using Pakistan's rugged tribal regions as a staging ground. The Los Angeles Times reports:

An intense, six-month campaign of Predator strikes in Pakistan has taken such a toll on Al Qaeda that militants have begun turning violently on one another out of confusion and distrust, U.S. intelligence and counter-terrorism officials say.

The pace of the Predator attacks has accelerated dramatically since August, when the Bush administration made a previously undisclosed decision to abandon the practice of obtaining permission from the Pakistani government before launching missiles from the unmanned aircraft.

Since Aug. 31, the CIA has carried out at least 38 Predator strikes in northwest Pakistan, compared with 10 reported attacks in 2006 and 2007 combined, in what has become the CIA's most expansive targeted killing program since the Vietnam War.

Because of its success, the Obama administration is set to continue the accelerated campaign despite civilian casualties that have fueled anti-U.S. sentiment and prompted protests from the Pakistani government.

"This last year has been a very hard year for them," a senior U.S. counter-terrorism official said of Al Qaeda militants, whose operations he tracks in northwest Pakistan. "They're losing a bunch of their better leaders. But more importantly, at this point they're wondering who's next."

U.S. intelligence officials said they see clear signs that the Predator strikes are sowing distrust within Al Qaeda. "They have started hunting down people who they think are responsible" for security breaches, the senior U.S. counter-terrorism official said, discussing intelligence assessments on condition of anonymity. "People are showing up dead or disappearing."

Although Osama bin-Laden and his number two, Ayman Zawahiri, remain well hidden somewhere in the vast area that straddles the Pakistan-Afghanistan border, other senior operational al Qaeda leaders, who presumably have to move around and communicate to get anything done, are getting knocked off whenever they stick their heads up:

The stepped-up Predator campaign has killed at least nine senior Al Qaeda leaders and dozens of lower-ranking operatives, in what U.S. officials described as the most serious disruption of the terrorist network since 2001.

Among those killed since August are Rashid Rauf, the suspected mastermind of an alleged 2006 transatlantic airliner plot; Abu Khabab Masri, who was described as the leader of Al Qaeda's chemical and biological weapons efforts; Khalid Habib, an operations chief allegedly involved in plots against the West; and Usama al-Kini, who allegedly helped orchestrate the September bombing of the Marriott Hotel in the capital, Islamabad.

Read the whole thing, and post a comment.

Bank bailout money already flowing into top Washington politicians' campaign coffers

(Hat tip: The Daily Beast)

If you think nothing could outrage you more than A.I.G.'s using federal bailout cash to pass out big "retention bonuses" to the knuckleheads who nearly collapsed the global financial system, what if you knew that some of that taxpayers' dough is already flowing into the campaign funds of top Democratic and Republican members of Congress?

Newsweek has the latest on this developing bombshell:

While a few big firms, such as Wells Fargo and JP Morgan Chase, have curtailed their campaign giving, others are quietly doling out cash to select members of Congress, particularly those who serve on committees that oversee TARP. In recent filings with the Federal Election Commission, the political action committee for Bank of America (which got $15 billion in bailout money) sent out $24,500 in the first two months of 2009, including $1,500 to House [Democratic] Majority Leader Steny Hoyer and another $15,000 to members of the House and Senate banking panels. Citigroup ($25 billion) dished out $29,620, including $2,500 to House GOP Whip Eric Cantor, who also got $10,000 from UBS which, while not a TARP recipient, got $5 billion in bailout funds as an AIG "counterparty." "This certainly appears to be a case of TARP funds being recycled into campaign contributions," says Brett Kappell, a D.C. lawyer who tracks donations. (A spokesman for Cantor did not respond to requests for comment. A spokeswoman for Hoyer said it's his "policy to accept legal contributions.")

I wouldn't want to talk about it either, if I were Cantor, and somebody better tell Hoyer that lately "legal" hasn't worked out as a winning standard for collecting campaign moolah from dubious sources.

It does look like the donors are aware of the downside of close scrutiny, but the donees are still hoping to find ways to pull in the cash without a lot of fuss:

The cash flow is already causing angst inside the Beltway. "The last thing I want to do is wake up one morning and see our PAC check being burned on C-Span," said one bank lobbyist, who asked not to be identified because of the issue's sensitivity. House Speaker Nancy Pelosi and House Financial Services chair Rep. Barney Frank both said recently they won't take donations from TARP recipients. But House Democratic fundraisers have quietly passed the word that the party's campaign committee will resume accepting them—but down the road, not right now. Said one fundraiser, who also requested anonymity, "These are treacherous waters."

I'll say, but then pols who think and act like baracudas are used to a little treachery.

Here's my question: how many of the 328 members of the House of Representatives who voted last week to tax bonuses paid out by 11 major financial institutions have taken or will take money from those companies or their employees or other companies that get federal bailouts?

What do you think of these campaign contributions? Post a comment.

As Obama pushes his ambitious agenda, he may be losing the center

Two months after taking office, President Obama is very much a popular guy. The RealClearPolitics average of recent polls shows him holding a 60.2 approval rating. That's only a bit below the the 63% average approval he scored in late January. However, then, only 20% disapproved, and that number has now climbed to 31.7%.

The trend is obvious. The honeymoon is over already, and Republican voters are increasingly disapproving. All those efforts by GOP leaders to rally their own base in the face of Democratic mockery have paid off, with the base coming home. In the above graph of Gallup polls, you can see the substantial fall-off of GOP support from 41% to 26%.

More significant is a small but noticeable trend of independents into the negative camp. Gallup shows independent support has edged down from a high of 63% to its current 59% -- not a big drop but one that could have a major impact on Obama's political clout, if the trend continues.

Are centrist and independent voters having second thoughts about the President for whom they provided the margin of victory just four months ago? For the most part, no, but there are some signs of unease with Obama's strategy of "going big" on the stimulus bill, the budget, health care, energy, education aid and other issues.

Rasmussen polls show that the number of voters who expect government spending to increase under Obama has jumped sharply from 54% after the election to 72% now. Only 18% of voters believe their taxes will go down under Obama, while 31% think they will go up. These "tax and spend" concerns are mother's milk to the GOP, which may already be drawing support from the center, as the bill for Obama's programs keeps rising.

A sure sign of that is the fact that Republicans have drawn even with Democrats in generic Congressional preferences for the first time in years, according to a National Public Radio poll conducted jointly by Democratic and Republican polling firms: 42% of the respondents said they would vote for a Democrat for Congress, and 42% said they would vote for a Republican. This tie is attributable to independents favoring Republicans for the first time since 2004:

Democrats still outnumbered Republicans in terms of party identification in this poll by 6 points, 45 percent to 39 percent. Democrats also favored their own party's congressional candidates 83 percent to 7 percent. But voters who call themselves independents gave GOP candidates the edge by 14 points, 38 percent to 24 percent. And self-identified Republicans supported their own party's candidates 85 percent to 3 percent.

In a separate Rasmussen generic congressional preference survey taken at about the same time last week, Republicans actually scored a small edge, 41% over the Democrats' 39%.

The National Journal's Charlie Cook reads the numbers this way:

Independent voters do not like partisanship, whether it is practiced by Democrats or Republicans. If Republicans really have pulled even or slightly ahead among independent voters, that is a very ominous sign for Democrats, an indication that Obama's talking the talk of bipartisanship isn't sufficient and that he and the Democratic majorities on Capitol Hill have to walk the walk.

I agree with Cook, but another closely related factor is the impact on centrist voters -- moderate-minded Republicans and Democrats as well as independents -- of the huge and seemingly endless costs of Obama's proposals. Voters are still worried more about ending the recession and reviving the economy, and they will give Obama a great deal of time and latitude as long as he is seen as working hard to get that done. But worries about the long-term costs, higher taxes and possible inflation are growing, too. A new report by the non-partisan Congressional Budget Office that pegs the coming decade's deficits at $2.3 trillion more than Obama has projected will accentuate these concerns.

Republicans will certainly challenge Obama aggressively on these issues, and moderate Democrats, conspicuously these 15 Senators, are likely to press Obama to look for reasonable middle ground. He should listen to them. There has been a lot of malarkey since Election day about a sweeping political realignment, a generational shift to the Democrats and the left trumping the need to govern from the center, and the twilight of the Republican Party. But here we are a mere two months into the new administration and there are signs that the always crucial center could swing back to the GOP in 2010, just as it did in 1992.

What's your thinking about the mood of the electorate? Post a comment.

Did the U.S. House of Representatives just become an out-of-control mob?

Congress rushes to the defense of the people

Cornered by popular anger over the obnoxious A.I.G. "bonuses," which Congress and the Administration both knew about in plenty of time to have blocked, members of the House of Representatives are in a full-blown panic, lest some of them lose their phony-baloney jobs.

First, they held a "hearing" the sole purpose of which was to allow as many Representatives as possible get video tape of themselves belatedly lambasting A.I.G. and its bonuses. Then, in order to grandstand as courageous defenders of the people and scourges of Wall Street, Democrats and Republicans joined together in the biggest display of bi-partisanship we've seen to pass by a 328-to-93 vote an insane bill.

Instead of retrieving bonuses that went to people who shouldn't have got them, or better yet, holding someone -- including themselves -- responsible for permitting the bonuses to be paid out in the first place, this execrable measure would punish potentially tens of thousands of people who had absolutely nothing to do with either the A.I.G. fiasco or the broader financial crisis. If it becomes law, the bill will tax 90% of any bonuses paid in 2009 by 11 big financial institutions that received at least $5 billion in federal money to individuals earning more then $125,000 or families earning above $250,000.

What this means is that if you're an assistant manager at a bank branch earning $60,000 married to a doctor who makes $200,000 and in January you got a $10,000 bonus for 2008, your bonus will be effectively confiscated to make politicians who were asleep at the wheel look better.

And it won't matter that the bank you work for didn't want the federal dough in the first place, as John Hinderaker explains:

Wells Fargo didn't want any TARP money, but the government forced it to take more than $5 billion worth, so Wells Fargo employees who receive bonuses would be subject to Pelosi's proposed tax. Say you're a teller at a Wells Fargo branch in Minnesota and you're married to a lawyer who makes $250,000 this year. You get a $10,000 bonus for your good work during 2008. The government steals it all (90 percent federal plus 8.5 percent state plus, unless it's included in the 90 percent, 3 percent Medicare). That is simply insane.

Spare me the details, some might say. This'll show 'em on Wall Street! We have to take a pound of flesh!!

Maybe so, but it might be nice to cut the flesh from someone who actually got fat on the greedy financial escapades of the past few years.

The House bill won't touch Joseph Cassano who headed A.I.G.'s Financial Products unit and played a leading role in pushing the high-stakes gambling that brought the company to its knees, because he left A.I.G. a year ago. Cassano was finally fired for losing billions of dollars but got to keep his $34 million in bonuses, not to mention the hundreds of millions that he and his associates at Financial Products raked in over several years.

It won't punish Martin Sullivan who was bounced as A.I.G.'s CEO in June 2008 as its financial troubles worsened. Sullivan "earned" $13.9 million in 2007 for his great work, and was long ago home free.

And if it's ill-gotten bonus money we're after, what about the $2.5 billion that Merrill Lynch paid to its employees just before its forced merger with Bank of America in December -- including 700 payments of more than $1 million? Nope, the bill won't get back a penny of that loot.

The bill would, of course, zap the bonuses of perhaps 100 of A.I.G.'s too-well paid execs who have the bad luck to still work at A.I.G. But the price for that is to punish a far larger number of uninvolved people.

Besides punishing mostly the wrong people, the House's crazy bill threatens to make a huge mess of efforts to coax and pressure the financial system back into working order so that all of us can avoid a far worse recession than the one we've got so far. New York Times business columnist Joe Nocera explains the risks of misdirected anger and irresponsible Congressional action today (read the whole thing) and sums up this way:

There are times when anger is cathartic. There are other times when anger makes a bad situation worse. “We need to stop committing economic arson,” Bert Ely, a banking consultant, said to me this week. That is what Congress committed: economic arson.

This week, the House of Representatives became an out-of-control mob throwing gasoline on the flames of an economic crisis. Let's hope that the Senate and President Obama can deal with these troubling issues with calm good sense, not panic, anger and cheap theatrics.

What do you think? Post a comment.

Did Tim Geithner lie? If so, he's toast.

As reported here, it turns out that Tim Geithner, among many others in the Administration and Congress, knew about the A.I.G. bonuses at least a week earlier than he has claimed since the issue blew up earlier this week. In testimony to a House committee on March 3rd, Rep. Joseph Crowley (D., N.Y.) asked Geithner what could be done about blocking the very same bonus money that was paid out last Friday to the geniuses at A.I.G., and Geithner gives a general answer about being "deeply committed" to doing the right thing.

Today, a Treasury spokesperson claimed that Geithner was "not aware of the timing or full extent of the contractual retention payments" on March 3rd.

Maybe so, but that only raises this question: after being asked directly about these bonuses by Congress why didn't he inform himself and the White House. (There is also the clear-cut fact that members of Congress, many of whom expressed outrage about this yesterday, also knew about the bonuses in early March, but that's another post.)

In any case, even if Geithner is doing a bang-up job, it's hard to see how he can survive as a political drag on Obama, particularly if the bonus issue continues to dominate the news come Monday.

Watch the whole video.

Got an opinion? Post a comment.

President Obama to Iran: Happy New Year

(Hat tip: Ben Smith at Politico)

Yesterday, President Obama delivered this video address to the Iranian people with subtitles in Farsi. Color me skeptical about whether this cuts any ice with the ayatollahs and their ruthless henchmen who run Iran. There is something to be said by using the Internet and rebroadcast by Gulf region TV stations to reach over the heads of the ayatollahs to the people of Iran. There is an intermittent reform impulse that we see occasionally in student demonstrations and the like.

Some observers parse Obama's words and find a de facto recognition of the current Iranian regime, a departure from past policy:

"This is huge," said Trita Parsi, president of the National Iranian American Council, a group that supports U.S. engagement with Tehran. "First of all, he is addressing the people and the government, which has not been done before. At one point he talks about the Islamic Republic. He's signaling he’s not looking for regime change; he’s recognizing Iran’s system.

"You always heard Rice and Bush say 'Iranian regime,'" Parsi noted. “It's a big difference.” That doesn't mean Obama doesn’t support Iranian democratization, Parsi said. "But he recognizes the government that exists in Iran right now."

I wouldn't put too much stock in this "big difference." In many areas, Obama's approach has been to show a willingess to change the words without necessarily changing anything else.

I suspect Obama's principal motive to is be able to say to the European and Arab states, "Look, I've tried then olive branch with these folks, so don't blame me if the whole thing goes south." We will see.

UPDATE -- Not surprisingly, the Iranian regime has already responded with a rhetorical back of the hand.

Have any thoughts about this? Post a comment.

A new look for the blog

After several months of posting here, I decided to try a different template. Google's Blogger offers quite a few options but they are far from unlimited. This one is fairly popular in the blogosphere, no doubt because it offers a clean stately look and is easy to read, particularly when a white background is chosen.

If anyone who recalls what the old blog looked like and has an opinion about the change, I'd like to hear about it in a comment. Thanks.

Rep. Stephen Lynch should apologize to A.I.G.'s Edward Liddy

Rep. Stephen Lynch disgraces himself -- Watch the whole thing

I'm as angry as anyone about the whole A.I.G. situation, as I said in this post. I also believe that right the way out with no further nonsense is to nationalize the company, split it in two, and place the toxic half under federal receivership.

That being said, at the circus calling itself a Congressional hearing yesterday, both Democratic and Republican politicians put on a disturbing display of feigned outrage and phony oversight.

We all know now that the A.I.G. bonuses have been openly on the table since last year. Congress and the current leaders of Congress, along with the Bush Administration, had numerous opportunities since last September to stop these bonuses or any other bonuses at bailed out companies. In fact, the $789-billion stimulus bill rushed through Congress and signed into law by President Obama in February at one point included language that would have barred the A.I.G. payouts, but that language was taken out with the full knowledge of Senate Banking Committee Chairman Christopher Dodd. We know that Treasury Secretary Geithner had ample opportunity to block the bonuses in his current job and in his former position as head of the New York Federal Reserve bank. And we know that the President himself knew about the bonuses several days before they went out, but he did not express his own "outrage" until after he saw the public outcry.

So there is plenty of blame to go around. You'd never know it from the clownish conduct of the House Financial Services Committee under Rep. Barney Frank's chairmanship. Members of both parties eagerly joined in whipping A.I.G. new CEO Edward Liddy. Liddy is not entirely blameless. In my opinion, he ought to have been more aggressive in fixing responsibility for the company's crack up down the line and ought to have found a way to persuade or force A.I.G. executives at least to defer these bonuses until the mess at the company could be cleared up.

Still, Liddy was asked by the government to take on the huge task of cleaning up the mess at A.I.G. last September. He had nothing whatsoever to do with the destruction of A.I.G.. He was not at A.I.G. when the company entered into the contracts bestowing the "retention bonuses." He came out of retirement and took the job for a dollar a year and has been working 24/7 for the past six months under the guidance of both the Treasury and the Federal Reserve to wind down A.I.G.'s "casino" business and put A.I.G. back on a sound footing.

So the guy deserves civil treatment -- tough questioning, yes, but abuse, no. The aptly named Rep. Stephen Lynch of Massachusetts outdid everyone in gratuitous, personal pillorying Liddy in the exchange shown in the video above. His conduct was that of a shameless bully.

Lynch's constituents ought to be asking him, as a key member of the Congressional committee that has responsibility for the entire process of bailing out financial services companies, where was he for the past six months when the $170 billion was pouring out the door to A.I.G. in three tranches? Did he even read the stimulus bill so he would know whether it barred such bonuses or not? Did he trouble himself to exercise any oversight before realizing that there was a big public stink and he needed to cober himself?

Lynch owes Liddy an apology. I'm not holding my breath waiting for him to offer one.

What do you think? Post a comment.

A really bad idea from Obama: no more armed pilots on airliners

The last defense against airline hijackers: captain and first officer

I really can't believe this story. It's such a stupid move. From The Washington Times:

After the September 11 attacks, commercial airline pilots were allowed to carry guns if they completed a federal-safety program. No longer would unarmed pilots be defenseless as remorseless hijackers seized control of aircraft and rammed them into buildings.

Now President Obama is quietly ending the federal firearms program, risking public safety on airlines in the name of an anti-gun ideology.

(snip)

The 12,000 Federal Flight Deck Officers, the pilots who have been approved to carry guns, are reported to have the best behavior of any federal law enforcement agency. There are no cases where any of them has improperly brandished or used a gun.

(snip)

Since Mr. Obama's election, pilots have told us that the approval process for letting pilots carry guns on planes slowed significantly. Last week the problem went from bad to worse. Federal Flight Deck Officers...indicate that the approval process has stalled out.

Pilots cannot openly speak about the changing policies for fear of retaliation from the Transportation Security Administration. Pilots who act in any way that causes a “loss of confidence” in the armed pilot program risk criminal prosecution as well as their removal from the program. Despite these threats, pilots in the Federal Flight Deck Officers program have raised real concerns in multiple interviews.

Arming pilots after Sept. 11 was nothing new. Until the early 1960s, American commercial passenger pilots on any flight carrying U.S. mail were required to carry handguns. Indeed, U.S. pilots were still allowed to carry guns until as recently as 1987. There are no records that any of these pilots (either military or commercial) ever causing any significant problems.

Screening of airplane passengers is hardly perfect. While armed marshals are helpful, the program covers less than 3 percent of the flights out of Washington D.C.'s three airports and even fewer across the country...

I don't know about you, but I feel a lot safer about flying knowing that guys like Sully Sullenberger up front in the cockpit are packing heat so they can never again be overwhelmed by a couple of terrorists with knives.

I hope this turns out to be the foolish work of some excessively anti-gun new political appointee at the Department of Homeland Security that will be overturned quickly by the White House.

What do you think about this? Post a comment.

Evan Bayh leads new caucus of 15 moderate Senate Democrats

Visit msnbc.com for Breaking News, World News, and News about the Economy

Indiana Senator Evan Bayh tells MSNBC about the new moderate caucus

This is a big deal, even if it can't compete with so many other newsworthy political developments for coverage today.

A couple of weeks ago amidst the debate over President Obama's $3.6 trillion budget proposal, Indiana's Senator Evan Bayh, who is well known as a moderate or centrist Democrat, pulled together a group of like-minded Democrats to put some brakes on Obama's expansive budget and spending plans. Today, Bayh announced that the group of 15 had formalized a new caucus in the Senate which he called "moderate, for lack of a better term" or "the practical caucus."

With Democrats still two votes short of controlling the 60 votes in the Senate needed to overcome filibusters and push legislation to a final vote, the center of gravity in the upper chamber is literally in the center – with those lawmakers most willing to cross the aisle holding inordinate power these days.

On the Republican side, Senators Susan Collins of Maine and Olympia J. Snowe and Senator Arlen Specter of Pennsylvania, have already formed an informal coalition working together, and with Democrats, to pass the economic stimulus bill.

Now, in a move to formalize centrist operations on the Democratic side, Senators Evan Bayh of Indiana, Blanche Lambert Lincoln of Arkansas and Thomas R. Carper of Delaware, have organized a coalition of 15 lawmakers that they say will work “to craft common-sense solutions to urgent national problems.”

The other members of the new caucus are: Mark Begich of Alaska, Michael Bennet of Colorado, Kay Hagan of North Carolina, Jeanne Shaheen of New Hampshire, Mark Udall of Colorado, Mark Warner of Virginia, Herb Kohl of Wisconsin, Mary Landrieu of Louisiana, Claire McCaskill of Missouri, Ben Nelson of Nebraska, Bill Nelson of Florida, and independent Democrat Joseph I. Lieberman of Connecticut.

Politico reports that there is growing uneasiness among Congressional Democrats about Obama's multiple ambitious proposals that extends beyond this this centrist group:

There is rising doubt among Democrats — particularly moderates already concerned about the big costs and deficits called for in Obama’s budget — that either Obama or Washington have enough bandwidth this year to stimulate the economy, overhaul the failed financial sector and move on to a far-reaching domestic agenda.

To the extent that the new caucus of 15 can find common ground with the three GOP moderates and, depending on the issue, draw some support from among another dozen or so pragmatically minded Republicans and Democrats, they will constitute the core of any 60-vote majority on any issue. As such, they can wield enormous power, obliging the Obama Administration and Senate Majority Leader Harry Reid to accommodate them.

Of course, they are in many ways a disparate group and won't pull together on many issues. But on the most crucial budget and tax questions, they are likely to work closely and will have a major impact on legislation. This is a welcome development. Now that the White House and both Houses of Congress are controlled by Democrats, only contending forces among Democrats can provide any check on runaway power.

What's your opinion about this? Post a comment.

How bad is the recession, really? Part V

Click on images to enlarge

The great economist John Kenneth Galbraith famously said that "the only function of economic forecasting is to make astrology look respectable.

So no one really knows what will happen to the economy in six months or a year -- least of all, me. But we do know what has happened over the past year or so. That knowledge is important to gaining a reasonable sense of what the immediate future might hold and to shape public policies.

For many months, we were treated to almost daily gloom and doom and talk of another Great Depression -- with even the President talking of "catastrophe" (fortunately, he's wised up and cut it out). That's why I've tried on several occasions to highlight the facts about the current recession and how it compares to past economic cycles -- here, here, here and here.

The line graphs reproduced above (from TIME magazine) are the latest and one of the best comparisons. The top graph shows job losses over time in six recessions since 1974, compared to the Great Depression (the Depression line is more choppy because the unemployment data then was not seasonally adjusted). As you can see, it's no comparison at all. We are 14 months into the current recession (the light blue line) and we are on a track similar to the 1981 recession but hugely different from the Depression. The second graph zooms in on the first 14 months of the current recession and the Great Depression. Again, the difference is dramatic.

The next time you hear any politician or pundit summon up the specter of another Great Depression, just be skeptical. As I posted before, there is no question that we're in a very bad spot -- the worst in a generation and terrible if you're one of the millions who has lost your job. But we've been here before -- most recently in 1981 -- and recovered very nicely.

What's your take on this? Post a comment.

Washington on A.I.G.: "We're shocked ... shocked ... that there's bonuses being paid here!"

The A.I.G. million-dollar bonus club

Everyone switch on your BS detectors because there's a lot of it flying around Washington over the A.I.G. bonuses. (Memeorandum has a roundup of all the latest stories and commentaries.)

President Obama says he's "outraged" and has ordered his team to use every "legal means" to get the money back. This after his own Treasury Secretary knew about the bonuses at least for several days and waved the dough on through. According to this report, the chosen means will be to "deduct the cost of the bonuses from the government's pending $30 billion cash infusion." Well, that'll teach 'em! The government has already pumped nearly $200 billion into A.I.G. so the deduction won't even be a rounding error -- and the clowns who got the million-dollar "retention bonuses" but left the company anyway will still have the loot.

Over in Congress, there are multiple plans and threats to tax all or most of the bonus money. Good luck with that, given that many of the beneficiaries don't live in the U.S., and their lawyers (you can get good lawyers if you pool your millions) will have a dozen ways to argue their case. Like Obama, members of Congress are all shocked, shocked to discover that this bonus business was going on and determined to get to the bottom of it and hold someone responsible (Tim Geithner is looking better and better for that role). But they ought to look in the mirror. Congress has had six months since the first bailout to block whatever compensation at A.I.G. they wanted to block, but nobody did a thing.

This is all theater and spinning. The deed is done; the money is out the door; there will turn out to be nothing that can be done about it -- except of course to engage in more partisan food fights about whether Obama or Bush, Geithner or Paulsen, should get more blame.

There is a bigger issue in all this that none of these pols are addressing. After two months of almost daily bickering about whether some of the big banks should be nationalized outright ( a bad idea), no one has even suggested nationalizing A.I.G. ( a good idea). That's especially curious since A.I.G. has received vastly more bailout money than any other company, and the government already owns 80% of the damn thing. What do we get for our 80%? Apparently, we get the brush off from managers installed by the feds!

I'm not normally a nationalizing kind of guy, but this company is begging for it. Most of Washington is agreed that A.I.G., with its unique, intricate connections to the whole global financial system, cannot be allowed to fail and bring the house down. We have put up $200 billion of the taxpayers' money to ensure its survival. But it's clear that we -- by which I mean Obama and Geithner and Congress, not just you or me -- don't really know what the company is doing. And we can't make it bend to our will even on a personnel matter. So how confident can anyone be that A.I.G. is operating in the public interest?

The answer is, we can't be confident at all. It's time for a 100% takeover. Probably, a takeover should be structured somewhat like a government-sponsored bankruptcy, with federal guarantees for all of A.I.G.'s obligations. The company should be split in two. The healthy, traditional insurance business would form one new company that should be reprivatized quickly -- through a sale or a new stock offering. The "bad" half -- the swap-issuing, securities-dealing "casino" business -- should be placed under an open-ended government trusteeship with the aim of unwinding its transactions and recouping as much money for the taxpayers as possible.

Really, this can be done in a few days. All it takes is an act of Congress and the naming of a few new executives and trustees. Ah, but that would take some actual responsibility in Washington at the White House and on Capitol Hill. That's the sort of thing that interferes with politics and grandstanding!

What do you think should be done about A.I.G.? Post a comment.