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Stress test kabuki

[I'm leaving this sticky because any post that elicits an on-the-fly response from danps just has to be good. Be sure to read all the way down to the UPDATEs --lambert]

Go read Yves [And Ritholtz.]

The whole episode reminds me of Iraq -- not just the use of our famously free press for disinformation campaigns, but... Remember the episode where the administration flew billions of dollars in cash on pallets over to Iraq, and never did figure out where most of it went? Like that.

Oh, and the Cassandras suffered the fate of all Cassandras. Fucking hippies, what do they know?*

NOTE * But at least they got to spend two whole hours with Obama at dinner, after all the decisions had been made! You can't say fairer than that!

UPDATE 1 Ritholtz:

Hence, it is not a big stretch to conclude that the entire stress test exercise is a near charade, with foregone conclusions of deleveraging banks to still wildly over-extended positions.

Unlike us hippies, Ritholtz really is read by insiders. So his reaction is an interesting data point.

UPDATE 2 I'm a little exasperated by the lack of coverage* on financial issues by the left in general, and even some of my favorite blogs (the ones I still read). It's a lot easier to get a real, or even vehement discussion going on issues that are trivial by comparison to this one. Versailles has given two trillion dollars to the banksters with no accountability and no transparency at all, and without even so much as a Congressional hearing. That decision is going to structure all of our policy choices for a very long time -- especially if it "fails," but even if it (by the bankster's standards) "succeeds." Whether your issue is Constitutional government and the rule of law, health care, patriarchy, the end of the empire, the media critique, global warming or anything else, following the money is central. Finance is not just another issue. For many -- and especially for the Versailles insiders -- it is the issue. In the finance blogosphere, there's a robust critique. In the left blogosphere -- let alone the "progressive" blogosphere -- there's no such thing. It's one thread among others. Why? This is exactly the kind of laziness and lack of curiousity that lets us sleepwalk into disaster.

UPDATE 3 Danps argues that the complexity of the issue drives bloggers away. 1. Let's not say "complex," it's a self-defeating frame. Let's say "obfuscated" (which, in the case of toxic assets, has the great merit of being true). 2. Under the Bush regime, the left blogosphere prided itself on its analytical capabilities and media critique. Why not now? 3. If this stuff is hard to learn, why not join forces with the econoblogs, who have a ferocious critique? As it is, the people with the knowledge have no capacity to mobilize, and the people with the capacity to mobilize have no knowledge. The banksters have us right where they want us!

UPDATE 4 * I should make it clear that I'm not saying there are no posts on this topic, and if that's what I wrote, I was wrong and I apologize. What I am trying to say is that the posting is radically incommensurate to the scale and impact of the topic. For example, in the run-up to the Iraq war, did we treat that issue as one among many? I'd argue no. The Iraq war was of paramount, transcendent importance, and the Cassandras who did that work treated it that way, and learned a great deal of value about the nature of the administration, its tactics, and how to resist them (See under 2006 midterms). I would argue that the financial crisis is today's Iraq. And I don't see a similar or commensurate level of effort. This is puzzling to me, and disappointing.

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twig's picture
Submitted by twig on

let the banks just "earn" their way back to solvency, as Tiny Tim proposes -- brilliant!!

And if anyone has questions about where the squillions of taxpayer dollars have gone, just ask Federal Reserve Inspector General Elizabeth Coleman. Or you could ask a rock -- in the end, you'd get about the same amount of information from either one.

dk's picture
Submitted by dk on

the Iraq war buildup.

Exhibit 1: Chris Bowers

I am not going to pretend to know whether or not the tests are just bullshit. What I do know is that they better not just be bullshit, or there will massively negative political consequences for the entire Democratic Party as a result.

That's it? He doesn't pretend to know, and thus he will just go along his merry way, whistling a happy tune? How would anyone in PB 1.0 have reacted if a Republican blogger had written the following leading up to the Iraq war:

I am not going to pretend to know whether or not [Reports of Al- Qaeda in Iraq/Colin Powell's UN Speech, etc.] are just bullshit. What I do know is that they better not just be bullshit, or there will massively negative political consequences for the entire [Republican] Party as a result.

gqmartinez's picture
Submitted by gqmartinez on

DK makes a great comparison to Iraq and we know how that turned out.

This situation does dwarf so many other issues as you mention, and that's why I can't get excited about Obama's small overtures to normalcy. It has ramifications on executive power that may come back to haunt us in so many areas (warrantless searches, torture, invading other countries, etc). If we suffer another 9/11 type attack I'm not sure Obama has the fortitude to avoid a Bush trap. And with an unaccountable executive we are practically begging Obama to abuse us down the road.

Submitted by StephenG on

Lambert, I am also exasperated by the lack of coverage on financial issues by the left. I think that some take the lazy way out because "following the money" takes work and thought and would cause some to admit that they backed the wrong guy. I mean, nobody likes to admit that they have been hoodwinked, bamboozled, lied to, led astray and run amok. I, frankly, hate that we have been essentially punked by Goldman Sachs and AIG.

But please continue on blogging this issue. It is too big to sleepwalk past it. Thanks for all that you do. Peace!

Submitted by jawbone on

Banksters. Per AP story today:

The White House told industry officials on Friday that it is leaning toward recommending that the Federal Reserve become the supercop for "too big to fail" companies capable of causing another financial meltdown.

Like, what could possibly go wrong with that?

Just before reading the AP story, I came across this at Susie Madrak's where she pointed readers to a piece by Eliot Spitzer in Salon about the make-up of the NY Fed committee.

So who selected Geithner back in 2003? Well, the Fed board created a select committee to pick the CEO. This committee included none other than Hank Greenberg, then the chairman of AIG; John Whitehead, a former chairman of Goldman Sachs; Walter Shipley, a former chairman of Chase Manhattan Bank, now JPMorgan Chase; and Pete Peterson, a former chairman of Lehman Bros. It was not a group of typical depositors worried about the security of their savings accounts but rather one whose interest was in preserving a capital structure and way of doing business that cried out for—but did not receive—harsh examination from the N.Y. Fed.

The composition of the New York Fed's board, which supervises the organization and current Chairman Friedman, is equally troubling. The board consists of nine individuals, three chosen by the N.Y. Fed member banks as their own representatives, three chosen by the member banks to represent the public, and three chosen by the national Fed Board of Governors to represent the public. In theory this sounds great: Six board members are "public" representatives.

So whom have the banks chosen to be the public representatives on the board during the past decade, as the crisis developed and unfolded? Dick Fuld, the former chairman of Lehman; Jeff Immelt, the chairman of GE; Gene McGrath, the chairman of Con Edison; Ronay Menschel, the chairwoman of Phipps Houses and also, not insignificantly, the wife of Richard Menschel, a former senior partner at Goldman. Whom did the Board of Governors choose as its public representatives? Steve Friedman, the former chairman of Goldman; Pete Peterson; Jerry Speyer, CEO of real estate giant Tishman Speyer; and Jerry Levin, the former chairman of Time Warner. These were the people who were supposedly representing our interests!

Of course, there have been the occasional nonfinance representatives from academia and labor. But they have been so outnumbered that their presence has done little to alter the direction of the board.

So is it any wonder that the N.Y. Fed has been complicit in the single greatest bailout of poorly managed banks in history? Any wonder that it has given—with virtually no strings attached—practically the entire contents of the Treasury to the very banks whose inability to manage risk has brought our economy to its knees? Any wonder that not a single CEO or senior executive of a major bank has been removed as a condition of hundreds of billions of direct cash and guarantees? Any wonder that, despite its fundamental responsibility to preserve the integrity of the banking system, it sat quietly on the sidelines as the leverage beneath the banks exploded and the capital underlying their investments shrank?

Food for thought, huh?

Foxes guarding too-big-to-fail henhouses....? See no foxes, hear no foxes, speak of no foxes. That's our current administration.

kelley b's picture
Submitted by kelley b on

The Left is generally silent on the economy because many of the Left are too scared by its failure and too busy trying to tread water to object to the scam.

Most people now realize the banks own it all which is a step forward.

This is another lesson in learned helplessness. The Company, as always, brings good things to life. Those feeling otherwise end up in the cornfield.

Submitted by Paul_Lukasiak on

I think that the lack of engagement by the left has a great deal to do with Obamania --- because the financial issues are both so complex and opaque, there is a natural tendency to not engage them that is heightened by the fact that Obama is now running the show, and the left is still in denial about the true nature of his administration.

Submitted by hipparchia on

they all trust obama, and even the ones who don't entirely trust him feel overwhelmed by the complexity [but even complexity is much less daunting when you have true transparency].

Sarah's picture
Submitted by Sarah on

perpetrated by a bunch of suit-and-tie con artists helped by the politicians they could buy since approximately 1960, aimed at undoing everything FDR put in place to stop them being the out-in-the-open respectable thieves they were from 1779 to 1929.

Nothing complex or opaque about it -- greed turns to stupid like oats and hay turn to horse manure. Sometimes it happens honestly, out in front of God and everybody, and sometimes it's hidden behind rich veneers and costly clothes. Doesn't change what it is, just how it looks. Not how it smells.

basement angel's picture
Submitted by basement angel on

of a narcissistic, sexually violent sociopath and during that engagement, I learned a tremendous amount about how con artists work. The shortest explanation I know of was from a guy in prison who had bilked by people of millions of dollars. In the beginning of a relationship - like within the first few minutes - he would tell a lie to the new acquaintance. If the acquaintance went along with the lie, then he knew he had them until the bitter end. Once someone had their "coming to Obama" moment, they were in on the con. They fell for the idea that nefarious means could be used to achieve an honorable goal - and of course, that never works. For God's sakes, the bill that moved the primary up in Michigan that eventually cost Clinton the nomination, was written by Republicans and passed on a party line vote with only Republicans voting for it. How is it desirable to choose our nominee based on the actions of the opposition? Yet, that is what we did and the lefty blogosphere acted as the shock troops for that action.

So, now they are in the position of having elected a right wing asshole who is handing trillions over to the banks and they don't want to admit that with all their analytical faculties, they fell for the bigotry and elected a right wing douchebag to the presidency.

Their refusal to investigate this is simple self-preservation. They were conned and they don't have the nerve to admit it yet. No one is who is actually familiar with clinton's voting record (and very few Obama supporters are) believes she would have handled it in this fashion. Heck, even Reagan wasn't this tied in to the financial industry. And yet, the blogosphere drove the anti-Clinton rhetoric and got their candidate elected. He is now the right of Bush and Reagan on critical issues. This is a catastrophe for the blogosphere and they have no idea how to deal with it.

Personally, I think Obama was the GOP candidate.

Submitted by lambert on

I like the con argument (after all, and put the "con"[fidence" [game] we hear so much about in the financial crisis in this context) but I think the real issue is how to, er, move forward. There isn't even a need to get those conned to admit they were conned (though see here). For example, your guy was in prison. That means that some people who were conned saw through the con and took action. Isn't it our task to help others do that? (Some, I grant, are irredeemable. But we don't know 'til we try...

basement angel's picture
Submitted by basement angel on

that ends a con. In a lot of cases, the families of people who are being conned contact authorities and it is very painful for their loved ones to come to terms with what they did.

I don't know that you can move the marker farther down the board when you have great swaths of the blogosphere and the media thoroughly corrupted. There may not be a big enough megaphone left to penetrate the American media market and that's what needs to happen.

BTW, Leonard Cohen is on tour right now because Bernie Madoff wiped him out. Ain't that somethin'?

tresy's picture
Submitted by tresy on

Leonard Cohen as not wiped out by Bernie Madoff. He was wiped out years ago by a trusted confidante who inveigled his way into his finances. I checked the list of Bernie's victims, just to be sure. Cohen's not on it.

vastleft's picture
Submitted by vastleft on

The use of "asshole" and "douchebag" undercuts your points. I have no fucking problem with strong language, it just isn't adding anything here.

Also, HRC has an extremely similar voting record to Obama's. There were several reasons that I grew to prefer her candidacy, but their voting records didn't put much daylight between the two of them.

basement angel's picture
Submitted by basement angel on

that Obama did not take a stand on. I was going to include a link to the National Journal's assessment of their voting record, but they have taken it off line.

If douchebag is good enough for Robert Novak, I would think it's good enough for Obama.

Submitted by lambert on

As the guy who propagated aWol for Bush, Google-bombed "Bush Mandate" to Mandate Magazine, and (together with VastLeft) managed to get purged from The Obama 527 Formerly Known as Daily Kos for propagating Unity Pony, I think I can speak with some authority on invective.

The problem with "douchebag" is that it doesn't advance the discourse in any way.* It's dull, not original, and it's not on-point in a way that causes others to use it (as, say, aWol was, in so very many ways). In other words, it's not viral. This has nothing to do with it's being true or not.

Now, if you want to use The Lightbringer, that is viral and does advance the discourse. Doubtless other forms of invective will occur to you if you put your mind to it. We're about inventing such sharp-edged polemical instruments here, and not about repeating dull terms of locker-room abuse; it's part (I would say) of what good writing means (some would disagree on nicknames, I think).

NOTE * In contradistinction to teabag which, back in the day, had a rather precise connotation for the sort of service that Beltway insiders performed for the great and the good.

basement angel's picture
Submitted by basement angel on

By referring to him in locker room terms, one helps reduce him to someone who is commonly referred to in locker room terms and to my mind, that would be an improvement over what we have now. Though the high toned rhetoric tends to be adulatory, he does get his share of that. What he has escaped is common rhetoric, and I think it would do the country some good to open up the dialogue. If you'd prefer, I'll refrain.

vastleft's picture
Submitted by vastleft on

... that it makes your/our concerns look trivial, like they stem from a juvenile animus, rather than a position of reason. Generic invective isn't snark, it's just flinging spitballs, which fails at being persuasive, artful, or ennobling.

basement angel's picture
Submitted by basement angel on

comments on the level of invective.I'm interested in ideas and as long as there are sound ideas, that's what catches my attention. Personally, I don't find profanity distracting. I know the rightwing likes to judge in the integrity of an argument on whether there is profanity, but I don't buy into that school of thought. I spend time with a lot people who are articulate and well-informed and they are, invariably, profane. I agree that it would be inappropriate and tiresome in a blogpost, but profanity in the more casual comments strikes me as appropriate and, in the case of Obama, necessary.

I guess we just disagree.

Submitted by lambert on

... though I say it, is here (VL predates me, though. Fuck!) ....

As usual, there's a context -- in that case, the hyperventilation by "serious" journalists about bloggers swearing, calls for a blogger ethics conference, etc. Point me to similar controversy on "douchebag," or a similar post on justifying it, and I might reconsider.

Lots of these things are riffs with a history. Fuck was even in the glossary, before the PHP accelerator decided it would crash when the glossary ran and disabled it. Not so douchebag, for good or ill.

I try, at least, to choose and polish every word -- just a film maker might look at every frame. That's exactly why these things (at least to me) are the very reverse of casual. So, "I guess we disagree," perhaps, but leave it to those who love the work and do it to make a judgment...

Note that I'm very interested in ideas, obviously. But I'm most interested in embodying ideas in words that make a difference. Being interested only in ideas sounds to me like reading a synopsis or a script, instead of actually going to see the movie.

tresy's picture
Submitted by tresy on

In Mamet's House of Games, the biggest sucker is the cop who thinks she's smarter than all of Mantegna's victims. If you think Hillary Clinton, spouse of the President who repealed Glass Steagall, was going to take on the banks any more than Obama did, you are still suckered by a con that everyone else has walked away from.

Submitted by lambert on

I'm a little baffled as to why you would imagine this "if you think" comment regarding the President's Secretary of State is on point. Can you elucidate? I'm dealing with the administration we have today, and I don't recall posting on potential alternative universes, especially with regard to the financial crisis. But since I've written so many posts on that topic, perhaps the one you're thinking of slipped my mind. Can you refresh my memory?

And yes, to Mamet as source material for all this.

vastleft's picture
Submitted by vastleft on


See Anglachel re: "the President who repealed Glass Steagall":

1. The Republicans controlled the Congress.
2. There was a significant difference between the original Senate and House versions
3. The Senate was deeply divided on the original version on a 54-44 party line vote.
4. The House was not so divided on its version, voting 343-86, so many Democrats voted for it.
5. The bill went into Conference and it was the Conference Report version that was eventually approved, 90-8-1 in the Senate, basically erasing Democratic opposition, and 362-57-15 in the House, making some small gains in Democratic support.
6. It was a veto proof vote.
7. It was signed on November 1999. Bills of this complexity usually take several months to become effective and several years because the implementation needs to be worked out.

"Everyone Else" was so shrewd about ensuring that Obama would never be challenged on anything, so I give little credence to Mr. Everyone Else. We don't really know what the differences would or wouldn't have been between an Obama administration and a Hillary Clinton administration. Might have been, as Lambert has suggested, marginal but notable advantages. But one big one would have been that the left would have retained its critical faculties regarding her policies. Oh, and she was promoting HOLC very early on. So, another "centrist," yes. But a wonkier one who wasn't ashamed of liberals. Might have been considerably better, possibly not.

Submitted by lambert on

Are "everyone else" the same as the "some" who "say"? Hard to know...

Submitted by lambert on

I'm confused.

basement angel's picture
Submitted by basement angel on

has WMD. Everyone knows that Clinton is to the right of Obama. Same thing. As Nietsche observed, whatever version of history is ultimated accepted is a result of power, not truth. Tressy is coming down on the side of power with that statement, not truth. She saying, in effect, that because the majority believe that Clinton was on the con, that means Clinton was on the con. Truth can be divined by majority support.

I don't know if Tressy voted for Obama or not, but this is something I hear from Obama voters frequently - that if I'm not happy with how far right Obama is, then I should be grateful that Clinton wasn't elected because she was even further right. Or that she was even more captive of Wall Street - whatever is being discussed. Neither charge is reflected in her actual voting record nor did she receive as much money from Wall Street as Obama did. I do know this - no president that I know of has been as captive of Wall Street as Obama is. There were actual prosecutions during the Reagan years. I don't see any evidence of that cranking up here.

Obama took 50% more money than Clinton from Wall Street:

I never thought I'd be linking eRiposte's excellent article documenting Clinton's voting record months after the election and months after Clinton became SOS. But it's clear that there are still people lingering under a false impression of her voting record:

Submitted by lambert on

Except the Cassandras were right, weren't they? Quelle surprise.

Although I think you're giving Tresy's comment -- Tresy is male, FWIW -- more credit than it deserves. Seeing as Tresy hasn't been back, I'm guessing it was just a hit-and-run "you suck"; a generic example of a stale genre. I can't imagine what the point was; the primaries have been over for months. Maybe some sort of anxiety reduction? Something tribal? Big fucking deal; at this point, I'm impervious.

kelley b's picture
Submitted by kelley b on

The Grand Old Pirates and the DINOcrats are all subsidiaries of the invisible empire that is global corporatism. For awhile, the oafish brutality of Bu$hCo-Cheneyburton suited their aggregate purpose.

Now, however, the $ystem's been run into the ground. The goal of placing an Obama- a Clinton would have done the same thing- in control is to smooth the flow of cash, and open the Treasury to the right people. As soon as they find the DINOcrats inconvenient, the banksters will abandon them, too.

Davidson's picture
Submitted by Davidson on

The thought of us going off the financial cliff scares me so much it makes me, at times, desperate to believe this is not happening. Especially after reading that Bloomberg article over how Geithner (and Summers) believe banksters can "earn" their way out of this mess like the Japanese tried to.

Also: speaking of news coverage, CJR drew up a list of all the articles that foretold of the economic crisis from 2000-'07 in order to show how the press, overall, failed.

Nell's picture
Submitted by Nell on

Davidson: The thought of us going off the financial cliff scares me so much it makes me, at times, desperate to believe this is not happening.

Finally, someone touches on the human as well as the political response. Denial is the first of those famous stages, yes?

The triple whammy is the fear-induced denial kicking in, the complexity (which is overcome-able but not easy), and the prospect of yet another front on which expressions of dissatisfaction will be met with hostility by Obama defenders.

Speaking strictly for myself, there are already so many of those fronts -- health care, torture and detention, government spying, Afghan/Pakistan war, Iraq occupation, labor rights, LGBT rights -- on which I'm seriously dissatisfied, even below my low low expectations, that I'm overwhelmed.

I can certainly agree that the financial giveaway is not just another issue area, it's the ball game; and yet I'm so much more capable of arguing my case and making some small amount of difference on those other issues. Even within those I have to ration the amount of free time and mental energy I have, so I focus almost entirely on what's most important to me. (Torture and lawless detention, and accountability for same.)