Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: Timothy Geithner

Anti-Abortion Terrorism Chalks Up Another Success

By

On June 9, 2009

Comments

The measure of terrorism's success

The measure of terrorism's success

The Tiller family has announced that it is closing Dr. Tiller’s clinic. The terrorists have won, and that assassination has succeeded in doing what it was meant to do. I’m sure the murderer is very happy tonight.

The bottom line on right wing terrorism against abortion rights is that it’s succeeding and has been for some time. Take a good hard look at the chart at the top and try and tell me otherwise. And when it comes to late term abortions, well, Tiller was one of the very few who still provided the service. According to Tiller, speaking in March before his assassination, he was one of only three doctors left in the US doing such abortions. Now there are two. If those numbers are right, one third of all abortion doctors doing these abortions were just killed.

In the aftermath of Tiller’s death, I heard a lot of progressives talking about how the anti-abortion folks were losing. The bottom line is that they’re winning. It is harder to get abortions than it was 5 years ago, or 10 years ago, or 25 years ago. Abortion access peaked in 1982 and has been declining ever since. Consider that the US population has increased by approximately 30% since 1982.  At the same time the number of providers has dropped by over a third.

Now, most types of abortion violence had been in a slow, long term decline (the exception is burglary) so there’s certainly some reason for optimism. At the same time I strongly suspect that anti-abortion violence will rise, along with other types of right wing terrorism, during Obama’s administration.

The larger point is simpler. It’s harder to get an abortion than it has ever been since Roe vs. Wade, because there are just less doctors who perform abortions. Until more doctors step up and start providing abortions, especially late term abortions, this will continue. It’s hard to blame doctors for not being willing to provide abortions. Not only could you be killed for doing so, your family will be stalked and perhaps harmed, your clinic will be burglarized, you will be subject to constant legal harassment and your life will, in general, be made a living hell along with the lives of your family, friends and associates.

It’s a lot to ask of someone. But this comes back to the truth of rights. You have no rights that people aren’t willing to suffer and die for. Rights that someone won’t put their life on the line for will be taken away by people who are willing to resort to intimidation, violence and to push for laws which take those rights away.

So the questions, then are these:

1) Where are the doctors who are willing to risk their lives, the lives of their families, and to endure constant harassment to ensure that women keep this right, not just in theory, but in practice?

2) Where are the mass of people who will provide money, aid, and physical protection to the doctors who put their lives on the line? Yes, they exist even now, but obviously there aren’t enough of them, because the number of abortion providers keeps going down.

Is this a right you’re willing to risk your life to keep? If enough people don’t answer that question yes, then you will continue to lose it.

Chart Source

Cross posted at Crooks and Liars.

The difference in opinion about whether the Geithner Plan will work is not about “faith”

By

On April 10, 2009

Comments

Matt Yglesias tries to sum up the differences between critics and supporters of the bailout plan:

The more I’ve followed the back-and-forth on this, the less actual disagreement about the facts I think I’m hearing. What the critics are saying is that Geithner’s plan couldn’t possibly recapitalize the banks in an adequate way unless it was implemented as a horrible giveaways. What the defenders are saying is that if you implement the plan the correct way, it will be a helpful step toward resolving the situation at a time when it’s difficult to imagine the congress appropriating the volume of extra funds necessary to full resolve the issue.

Ultimately, these two points aren’t in conflict with one another. They’re different interpretations of the situation that are based on different assumptions about the competence and good will of the people involved. If you assume that the key policymakers are smart people doing their best, then you’re going to line up with Spence. You’ll predict a degree of success from the Geithner Plan followed by the need for additional action. And you’ll be concerned that over-the-top criticism of Geithner and the Treasury Team is going to undermine the political support that will be needed for further action. But if you assume that the key policymakers are inept, or unduly under the sway of big finance, you’ll see that a sound implementation of the Geithner Plan wouldn’t generate the needed volume of money, so the plan “must” be for a large giveaway.

What?  No, Matt, what the critics are saying is that if you’re going to recapitalize the banks there are ways to do it that aren’t nearly as horrible giveaways at the way that Geithner and Obama chose to do it.  The plan is a horrible giveaway.  This is not in question, it is simply a matter of fact.  What wouldn’t be as much of a giveaway was, oh, nationalizing the banks; or pushing them into receivership so the bondholders take a haircut and the stockholders are wiped out.  In that case either the government would have all the upside (nationalization) or less money would be required (receivership.)  Either way, better for taxpayers.

We also note is that if you want to start lending back up there are simpler ways to do it than throwing money at the banks—take them over, recapitalize and lend. Or just have the Fed lend directly to consumers and businesses.

We likewise note that the effects of this plan will probably be similar to what happened to Japan after its bubble burst.  The technical details may be different about what’s being done, but the end effect of huge amounts of debt hangover depressing the economy are likely to be depressingly similar.

And why wouldn’t we assume that the key policymakers aren’t inept?  Both Geithner and Summers didn’t see this coming, even though plenty of other peole did.  They are perfect in their records of calling the economy and the market wrong.

This isn’t just about whether you think the key actors are competent individuals operating in good faith, though that’s part of it. It’s about the fact that many of us think there are better options available than the Geithner plan.  However what those options all have in common is that the people in charge of the banks right now don’t come out the end as powerful, rich or well paid.

Since those options are better except for this one difference, we think that that difference must be, as the saying goes “not a bug, but a feature”.

This is not just a difference based on, as Chris Bowers suggest, trust or distrust, it is also based on fundamentally different ideas about how the government should work, who it should take care of first and how the economy operates best.

Some of us just don’t believe in privatizing profits, socializing losses and leaving the same group of people in charge who caused the disaster.  And at the end of the day, say what you will, that’s what this plan does.

I’m Sure There’s a Difference Between the Bush/Paulson, Obama/Geithner Approaches to Bailouts

By

On April 4, 2009

Comments

I’m just not sure what:

The Obama administration is engineering its new bailout initiatives in a way that it believes will allow firms benefiting from the programs to avoid restrictions imposed by Congress, including limits on lavish executive pay, according to government officials.

Administration officials have concluded that this approach is vital for persuading firms to participate in programs funded by the $700 billion financial rescue package.

The administration believes it can sidestep the rules because, in many cases, it has decided not to provide federal aid directly to financial companies, the sources said. Instead, the government has set up special entities that act as middlemen, channeling the bailout funds to the firms and, via this two-step process, stripping away the requirement that the restrictions be imposed, according to officials.

At this point in time, there seems to be no significant functional difference between Paulson/Bush and Geithner/Obama.  Both intended to give a ton of money to financial firms, either directly or by buying up crap at prices higher than justified.  Both opposed any meaningful restrictions on how they spent the money or who they gave it to.

Actually, I take it back, one difference is that when Paulson wanted 700 billion, he went to Congress.  When Geithner made up his plan he just had the FDIC and the FED pony up most of the money, because he knew Congress wouldn’t give him the money.

Some wonder if this is legal:

Although some experts are questioning the legality of this strategy, the officials said it gives them latitude to determine whether firms should be subject to the congressional restrictions, which would require recipients to turn over ownership stakes to the government, as well as curb executive pay.

Me, I don’t know if it’s legal.  What I do know is that they plan on giving money away in a manner which clearly intends to end-run Congress’s clearly legislated mandate for how it be given away.  What I know is that they are bypassing Congress when they can, because they know that the elected body which is the only one supposed to be able to pass spending bills wouldn’t give them all the money they want to spend and won’t let them spend what money it does give as freely as they want to.

Of course, that money will still have to be paid back by taxpayers, even if Congress never approved the spending.

But back to the TARP restrictions:

Congress drafted the restrictions amid its highly contentious consideration of the $700 billion rescue legislation last fall. At the time, lawmakers were aiming to reform the lavish pay practices on Wall Street. Congress also wanted the government to gain the right to buy stock in companies so that taxpayers would benefit if the firms recovered.

The requirements were honored in an initial program injecting public money directly into banks. That effort was developed by the Bush administration and continued by Obama’s team. The initiative is on track to account for the bulk of the money spent from the rescue package. All the major banks already submit to executive-compensation provisions and have surrendered ownership stakes as part of this program.

Yet as the Treasury has readied other programs, it has increasingly turned to creating the special entities. Legal experts said the Treasury’s plan to bypass the restrictions may be unlawful.

The problem is that while Geithner’s plan takes money from the FDIC and the Fed, it still uses some TARP money as seed money, and that money carries the restrictions.

I thought it wasn’t the executive’s job to decide that Congress is wrong and then deliberately end-run it.  I thought we had an election to stop this sort of thing.

This is one of the things we spent the last 8 years blasting Bush for doing. But in this particular case, the new administration is being less compliant with Congress’s will than the Bush administration was!

Less!

I don’t know whether to spit or cry.  I’ve always had my doubts about Obama, but in my worst dreams I didn’t think he’d try and end run Congress even more blatantly than Bush, in order to give even more money away to the richest Americans with even fewer restrictions and less protection from the taxpayer in terms of ownership stakes.

It’s going to be a long 4 years.

How To Reform Credit Default Swaps

By

On March 26, 2009

Comments

Geithner was asked today if he believed in naked credit default swaps.  Apparently he does, but it was both the wrong question and answer.  Reform of credit default swaps needs to be thorough, and though through from basic principles.  Here’s how to fix credit default swaps.

The first step is a name change.  Call them insurance, because that’s what they are.  The insure against the possibility that you won’t get paid money someone owes you.  Once they’re called insurance, regulate them like insurance.

  1. Require an insurable interest.  That is, if Joe owes Fred money, Emma can’t buy insurance on Joe not paying Fred.  This is a fundamental rule in most insurance, you can’t insure someone else’s house against fire, because then you have a reason to want that house to wind up on fire, and no reason not to want it to burn down.
  2. Don’t allow over-insurance.  No debt can be insured for more than it’s worth.  If Joe owes Fred $100, then Fred can’t buy more than $100 worth of insurance.  In fact, better, he can’t buy more than $90 worth of insurance.  Again, we don’t want anyone better off if the debtor defaults than if they make the payments.  In life insurance there are many studies which show that people who are worth more dead than alive tend to die a lot more than people who aren’t over insured.  Imagine that.
  3. The mathematical models and actuarial tables used to figure out how much must be paid for insurance, the premiums, are set by government actuaries, just like they are in most other insurance businesses.  Current credit default models tended to assume things like “this housing bubble will last forever” and “there will never be another recession” and “defaults don’t cluster”.  Those assumptions were so wrong that building them into models amounted to fraud.
  4. No product which insures against credit default can be put on the market without actuaries from government regulatory bodies reviewing it.
  5. Proper reserves.  The party issuing the credit default swaps must have enough money to back them up, based on the governments actuarial charts and reserve requirements.  Life insurers and property insurers have to, so should credit insurers.  These reserves cannot be the debts the insurer is insuring.

There are other methods one could use to regulate and fix the default market, like having open exchange traded contracts, which could be made to work as well, but this is the simplest model and one that has worked well in the rest of the insurance industry.

The larger rule is simpler: no unregulated financial markets or entities without sufficient capital to cover their bets, so the taxpayer winds up stuck with the bill.  If you want to gamble, go to Las Vegas.  If you want to sell insurance, be a nice old fashioned stody insurance company who pays your executives low six figure salaries.

Does the Geithner Plan Reduce Credit Default Swap Risk Too?

By

On March 24, 2009

Comments

Credit default swaps (CDSs) are still a big issue. Estimates of how much of the market is at risk vary, but the lowest I’ve seen is about $15 trillion.  If that goes bad, we’re probably talking another $3 or $4 trillion of damage.

While I agree that CDSs are an issue, I also think that taking bad assets off firm’s hands makes defaults on CDSs more unlikely, and thus reduces exposure to them.

Of course, this really depends on whether the fundamental problem lies with the economy or the financial market—or both.  If the economy keeps going south, then bailout after bailout will be needed, defaults will happen anyway, and CDSs will be called.  If the combination of fixing the financial sector plus the stimulus bill and military spending is enough to stop the economy’s downward spiral, on the other hand, then Geithner’s plan may well do the trick (once a couple more trillion are spent). We’ll see.

(Aside: Interest rate and currency swaps are about a 7 times larger market than CDSs.  The real risk is a currency meltdown by a major economy.)

Market Rallies On News of Trillion Dollar Giveaway

By

On March 23, 2009

Comments

Image by TW Collins

Image by TW Collins

Is anyone really surprised the DOW is up almost 500 points, after Geithner promised to give private investors almost $1 trillion to gamble with?

The details of the giveaway are fascinating.  I sure wish that I could get financing like this to play the market:

Under one part of the plan focused on bad loans, the Treasury will provide up to 80 percent of initial capital alongside investment by private funds. The FDIC would then offer debt financing for up to six times the pooled amount.

Now, unless I’m messing up my math, that’s 24/1 leverage.  If older details hold, and the 80% is a non-recourse loan, meaning that it’s secured only by the value of securities bought, then it’s even sweeter.

PIMCO has announced it’s interested in participating, which means that the plan has succeeded in one sense—it has the buy-in of some very smart money.  That doesn’t mean that it’s necessarily good for taxpayers, or that it will be good in the long term for the economy, necessarily, but at least it isn’t being laughed out of Dodge.  On the other hand, would you refuse 24/1 to one financing?  Or even matching funds, as contained in part two of the plan?

I sure wouldn’t.  And PIMCO have been scavengers before.  They bet heavily in Fannie and Freddie bonds after it was clear Fannie and Freddie were insolvent, which was a bet that the government wouldn’t shear bondholders when it bailed out Freddie and Fannie.  Smart bet, but not a good return for taxpayers, who would have been better served by letting Freddie and Fannie’s debtholders lose money.

I am becoming increasingly convinced that my original call was the right one: that the various bailouts would lead to Japanification.  For 20 years now, since its own bubble burst, Japan has had an economy which slips in and out of recessions like clockwork and which never ever really got good again.  In Japan’s case, the lousy economy was in large part because they left a lot of debt debt on the books of private corporations.  In America’s case, the debt may be transfered to taxpayers, but the end result is likely to be the same, only compounded by attempts to create secondary bubbles so that the toxic waste regains enough value to claim a win.

Given that Geithner’s trillion dollar giveaway has been greated ecstatically by the financial sector, I expect we’ll see more money used in this fashion.  This plan appears to be good for about $2 trillion of lousy debt ($1 trillion from the matching 1/1 program, $1 trillion from the high leveraged portion).  Total current toxic waste on the banks books is probably about $4 trillion, which will still have to be dealt with.

That money will have to be paid off, eventually.  Doing so will cost the US  and the world a great deal of future growth, and individuals a great deal of future income and employment.  As things stand right now, I don’t think employment levels as measured by employment/population ratios will recover in the forseeable future—post recession “full” employment will just be lower than pre-recession “full” employment.  There are still some ways this could be made to work for everyone, and I’ll discuss those at a later date.

More Details On Geithner’s Plan

By

On March 23, 2009

Comments

US Gold Coin

US Gold Coin

Bloomberg’s has more highlights of Obama’s plan for toxic assets that will be unveiled Monday by Treasury Secretary Geithner.  Newer details include:

  1. Geithner will ask Congress to give the Treasury and FDIC more powers: to guarantee more types of debt, limit payments to creditors,  and break executive compensation contracts.
  2. The Federal Reserves Term Asset Loan Facility program (TALF) will expand to riskier assets. Financing will be 1:1, and will apparently include private partners (in a way similar to the Treasury fund) who will make the investment decisions.  Profits and losses will be shared between the government and the private sector.

I still don’t like the FDIC funding plan, because the public component is up to 97%, but the Fed TALF plan makes a lot more sense.  Doing the funding 50% public, 50% private is much more fair, is not nearly as heavily leveraged (although leverage can be applied in other ways) and losses are shared much more equally, assuming these are not non-recourse loans (which they appear not to be, though that’s not certain.)

The additional powers Geithenr is asking for are acceptable, except for the ability to guarantee more types of debt.  The FDIC is already guaranteeing many bank assets: the idea of them guaranteeing even riskier classes only serves to set up  taxpayers to shoulder even more losses from the private sector’s.

Many of these concerns would be moot if the administration would just nationalize firms which are effectively insolvent. But, given that the administration won’t nationalize the banks, at least parts of this plan are not completely stupid.

The plan does however appear to perpetuate the trend of taking on private losses and putting taxpayers at risk for most of them.

Page 3 of 3

Previous

Powered by WordPress & Theme by Anders Norén