Dean Baker:

Word has it that President Obama intends to appoint a task force the week after next which will be charged with "reforming" Social Security. According to inside gossip, the task force will be led entirely by economists who were not able to see the $8 trillion housing bubble, the collapse of which is giving the country its sharpest downturn since the Great Depression.

This effort is bizarre for several reasons. First, the economy is sinking rapidly. While President Obama's stimulus package is a good first step towards counteracting the decline, there is probably not a single economists in the country who believes that is adequate to the task. President Obama would be advised to focus his attention on getting the economy back in order instead of attacking the country's most important social program.

The second reason why this task force is strange is that Social Security doesn't need reforming. According to the Congressional Budget Office, it can pay all scheduled benefits for the next 40 years with no changes whatsoever...

...It is especially infuriating that this task force is likely to headed up by economists who somehow could not see an $8 trillion housing bubble. The incompetence of such economists has inflicted enormous pain on billions of people around the world. However, unlike people who fail in other professions, economists who mess up on the job just get promoted so that they can do even more harm.

My guess is that this task force will not be very popular except at the Washington Post and on Wall Street.

Long-term analysis of global economy and of constraints on U.S. political economy suggests failure inevitable.

From James Galbraith on Democracy Now:

The stimulus package is a very good bill, and it should pass. It will not, by itself, deal with the economic crisis that we're in. I think we should be very clear about that. Expectations for an early turnaround should not be — you know, should not be very high. A clear — a major problem that we face is that the stimulus package is sized so that it will work only if the revival of credit, which is part of the plan that the Treasury is announcing today, also works. And the problem is that that plan is still, I think, not well designed and is not likely to succeed....I think it's very important to understand that this spending package is really geared to the success of this other piece, and this other piece is much more problematic than the spending package is.

....The crucial question is, on what terms does the Treasury plan to guarantee or to repurchase or to otherwise deal with the bad assets that the banks have? These assets are mortgage-backed securities. They are securities derived from subprime loans that were made in an atmosphere of regulatory laxness and complicity and fraud, basically, during the Bush administration, which came to take over the system of housing finance and to infect it with assets which nobody trusts, which nobody can value. And nobody really knows what's in the files, what's on the loan tapes of those—that underlie those securities. So the question that I think we need to ask is, before we issue a public guarantee, does the Treasury of the United States plan to conduct a meticulous audit of the assets that underlie the securities that they're expecting to take off the banks' books, so that we, the taxpayer, can have an idea of what, if anything, these securities are worth?

And the problem is that when you — the little bit of checking that has been done appears to reveal that a very large fraction of these securities contain, on the face of it, misrepresentation or fraud in the files. And so, we are looking at an asset which nobody, no outside investor doing due diligence on behalf of a client for whom they have some responsibility, would touch. And that is the issue. That's the problem. If that is indeed the case, then I think it's fair to conclude that the large banks, which the Treasury is trying very hard to protect, cannot in fact be protected, that they are in fact insolvent....

And the sooner that you get to that and the sooner that you take these steps, which every administration, including the Bush administration, actually took in certain cases — replacing the management, making the risk capital take the first loss, reorganizing the institution, guaranteeing the deposits so that there isn't a run, reopening the bank under new management so that it can begin to function again as it should have all along as a normal bank — the sooner you get to that, the more quickly you'll work through the crisis.

The more you delay and the more you try to essentially prop up an institution whose books have already been poisoned, in effect, by this — the practices of the past few years, the longer it will take before the credit markets begin to function again. And as I said before, the functioning of the credit markets is absolutely essential to the success of the larger package, of the stimulus package and everything else, in beginning to revive the economy....

...When you're dealing with a bank which has already basically rendered itself insolvent by virtue of its complicity — it's basically seeking for easy money, for big profits, out of mortgage originations and underwriting fees in the last part of this decade — then you're dealing with a bank which is already underwater. The risk capital is already worth nothing. It's being held up only by the expectation of a federal bailout. The management is — the problem with leaving the management in place is that you cannot rely on the existing management to give you a full and fair accounting of what is in the books of the bank and what the practices of the bank are. That is why you need to bring in a new team. You need to bring in a team which is nominated by the FDIC, which has as its first objective coming clean, going through the books of the bank and separating the good assets from the bad assets, the assets which are—which have a reasonable chance of continuing to earn income from the assets which need to be written down or written off. Then you can make an assessment of just how big the losses are and what has to be done, whether the bank itself should be closed, which is sometimes the case; whether it can find a merger partner, which is sometimes the case; or whether what you do is reorganize it, isolate the bad assets from the good assets and relaunch the good assets as part of a new bank. One thing or another has to be done. And when it's done, you can begin to basically grow the economy on the basis of these new newly reconstructed credit institutions.

But so long as you're dealing with the old management and so long as you're dealing with the old practices and so long as you don't have a clean audit of the books, the chances are that the bank is going to behave in ways which are not constructive, which do not contribute to the growth of the economy, and which leave all kinds of suspicions present in the system about the integrity of the institution and of the regulatory process. And that's the problem the Treasury Department seems to be determined not to face.

Again, this may not be as important as the bank bailout. But it ties in.

---

Dear Thomas Fuller:

I was appalled at your unbelievably lazy attempt-hatchet-job on M.I.A. today. You and the Times should be ashamed at such half-ass drek.

Do you have the slightest understanding of popular music or what it means to make "political art," and how complicated a term this is? Did you LISTEN to a single song by M.I.A.??? You wouldn't know it reading your article! All you do is quote a notorious piggybacker who popped up a while ago with some sad attempt to politicize and capitalize on her success.

I find it interesting that instead of actually quoting the musician herself (she is NOT a "rapper," by the way), you quote an interview with Tavis Smiley. Has the Times fallen that low that you can't even get your quotes yourself? Is this recession reportage? I'd be embarrassed for you if I wasn't so outraged. M.I.A. is a brilliant artist who was practically exiled from the United States by the Bush administration during the making of her last album because they, like you, labeled her some sort of dangerous terrorist advocate. Did you even know that? Do you like being in such despicable company? She deserves better than this in her introduction to many readers who had likely not heard of her prior to the Grammys or your limp screed.

The truth is that there are NO direct political statements in M.I.A.'s music, of any kind. Mentioning the word "tiger" or the group "PLO" does not constitute a political program. What M.I.A.'s music does, consistently, is to problematize ideas and assumptions in pop music and culture alongside analogous social or political concepts. As good artists do, she LOOKS CLOSELY, and always keeps her terms ambiguous-- she does not trumpet specific messages.

I can understand that such nuance might be beyond someone such as you, who has no interest in paying attention and wants to simplify the endeavors of artists to black-and-white, yay-or-nay. But this is what art is actually FOR. So fuck you.

----

How does this relate to the crisis? Easy.

American culture is now being unveiled as one massive play of appearances with no underlying substance or material. A news article without reporting still "looks" like a news article. Utterly worthless assets are packaged to "look" like assets. An aircraft carrier, a "Mission Accomplished" banner and a president "look" like victory.

A strict Marxist might argue that this is our cultural institutions inheriting their devious form from our capitalist structure. But I would argue the opposite. I say that capital in the States takes its form from Hollywood, from TV, from our invincible popular culture.

The "American dream" was shaped as a series of desire-images from the inception of film. There has been an endless and increasingly drastic deferral between here and there, reality and dream, material and value.

I believe that Obama is genuinely committed to peeling back this facade. But the "panic" that speakingcorpse is speaking against is a real thing-- it is fear of the Real, fear of what lurks behind the screen. One fears great repercussions if the game is up, if we have to see what is really there. Don't be surprised if we never get around to facing it, no matter how dire things get.

Paul Craig Roberts:

The unemployment rate reported in the US media is a fabrication. Williams reports that in changes since 1980, particularly in the Clinton era, "‘discouraged workers’ those who had given up looking for a job because there were no jobs to be had--were redefined so as to be counted only if they had been ‘discouraged’ for less than a year. This time qualification defined away the bulk of the discouraged workers. Adding them back into the total unemployed, actual unemployment, [according to the unemployment rate methodology used in 1980] rose to 18% in January, from 17.5% in December.”

Of course I have the tendency to be inflammatory and intemperate, so I am controlling myself and merely paraphrasing the argument of Martin Wolf, of the august Financial Times:

Has Barack Obama’s presidency already failed? In normal times, this would be a ludicrous question. But these are not normal times. They are times of great danger...

The banking programme seems to be yet another child of the failed interventions of the past one and a half years: optimistic and indecisive. If this “progeny of the troubled asset relief programme” fails, Mr Obama’s credibility will be ruined. Now is the time for action that seems close to certain to resolve the problem; this, however, does not seem to be it.

All along two contrasting views have been held on what ails the financial system. The first is that this is essentially a panic. The second is that this is a problem of insolvency. [The former is not a "view": it is both an infantile fantasy and a lie used to perpetrate theft on a world-historical scale. --speakingcorpse ]

Under the first view, the prices of a defined set of “toxic assets” have been driven below their long-run value and in some cases have become impossible to sell. The solution, many suggest, is for governments to make a market, buy assets or insure banks against losses. This was the rationale for the original Tarp and the “super-SIV (special investment vehicle)” proposed by Henry (Hank) Paulson, the previous Treasury secretary, in 2007. Under the second view, a sizeable proportion of financial institutions are insolvent: their assets are, under plausible assumptions, worth less than their liabilities.... In recent comments to the Financial Times, Nouriel Roubini of RGE Monitor and the Stern School of New York University estimates peak losses on US-generated assets at $3,600bn. Fortunately for the US, half of these losses will fall abroad. But, the rest of the world will strike back: as the world economy implodes, huge losses abroad – on sovereign, housing and corporate debt – will surely fall on US institutions, with dire effects....

The new plan seems to make sense if and only if the principal problem is illiquidity. Offering guarantees and buying some portion of the toxic assets, while limiting new capital injections to less than the $350bn left in the Tarp, cannot deal with the insolvency problem identified by informed observers. Indeed, any toxic asset purchase or guarantee programme must be an ineffective, inefficient and inequitable way to rescue inadequately capitalised financial institutions: ineffective, because the government must buy vast amounts of doubtful assets at excessive prices or provide over-generous guarantees, to render insolvent banks solvent; inefficient, because big capital injections or conversion of debt into equity are better ways to recapitalise banks; and inequitable, because big subsidies would go to failed institutions and private buyers of bad assets.

Why then is the administration making what appears to be a blunder? It may be that it is hoping for the best. But it also seems it has set itself the wrong question. It has not asked what needs to be done to be sure of a solution. It has asked itself, instead, what is the best it can do given three arbitrary, self-imposed constraints: no nationalisation; no losses for bondholders; and no more money from Congress. Yet why does a new administration, confronting a huge crisis, not try to change the terms of debate? This timidity is depressing. Trying to make up for this mistake by imposing pettifogging conditions on assisted institutions is more likely to compound the error than to reduce it.

Assume that the problem is insolvency and the modest market value of US commercial banks (about $400bn) derives from government support (see charts). Assume, too, that it is impossible to raise large amounts of private capital today. Then there has to be recapitalisation in one of the two ways indicated above. Both have disadvantages: government recapitalisation is a bail-out of creditors and involves temporary state administration; debt-for-equity swaps would damage bond markets, insurance companies and pension funds. But the choice is inescapable. If Mr Geithner or Lawrence Summers, head of the national economic council, were advising the US as a foreign country, they would point this out, brutally. Dominique Strauss-Kahn, IMF managing director, said the same thing, very gently, in Malaysia last Saturday....

All in all, then, sweet! Have a nice day! = - )

link

In internal administration battles, Geithner “successfully fought against” stricter rules on executive pay, and beat back the attempts to replace top maangement.

Of course, to say that Geithner won these battles is to say that Obama agreed with him. Once again, the embodiment of hope and change went with the status quo when he didn’t really have to. There would have been little political price to pay for putting the screws to the banksters.

And it looks like the Treasury and the Fed will pump up some $250-500 billion to help hedge funds buy bad assets - with the FDIC guaranteeing the buyers against losses.

At this point, the only thing that makes any sense is to nationalize the weakest banks, kick out management, wipe out the shareholders, clear the decks, and start over with a tightly regulated system. This isn’t even all that radical a position anymore - and it may be inevitable, if these sick and devious “public-private partnership” schemes don’t work out, which seems likely. There is a radical nationalization position - take the banks over and convert them to public institutions - but I know that’s completely out of the question with this gang. But they’re doing absolutely everything they can to avoid even an orthodox nationalization. This is looking more and more like Japan’s disastrous indulgence of their “zombie banks” in the 1990s than Sweden’s successful bailout, the model for the “nationalize them and clear the decks” approach. Instead of a few rough years, we’re likely to get a miserable decade.

They’ve botched the stimulus, and they’re botching the financial rescue. They’re worse than I expected, and I wasn’t expecting much in the first place.

UPDATE

Metaphor overload:

There is a metaphor in here somehwere...

I just posted this to the Curt Schilling blog, where the topic is A-Rod and Curt has taken the time to reassure his readers that HE, of course, is pure...

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All one need do is look through the different comments on this post to see the catch-22 that baseball is in and will be in for the foreseeable future.

Even if the 104 names are released, then what? People will stop asking questions and casting suspicion? What if the report missed certain steroid users? How can a single report be taken as the end-all, be-all? It certainly won’t be.

The label “steroid-user” is close to that of “communist” during the Cold War or “terrorist” during the Bush era– anyone can be one, no matter how innocent you look. It’s a trap that taints everyone. Guilt by association? That is what steroids is; that is their real effect.

This effect should not be limited to baseball. In the end, if we let it, it will taint every other sport as well, every achievement, everything.

We do, however, have another option, perverse as it sounds. We can simply come to ACCEPT that players were and are using these drugs, that it is NOT, in fact, cheating. There is no way to truly establish what cheating is when you do not really know who is cheating. The “steroids era” creates an impossible purity that no one can live up to. It is we, the fans, who have to adjust our expectations about what athletes are doing in their preparation for performance.

We also must accept, as fans, that the institutions such as MLB that we have allowed ourselves to be entertained by have quite publicly not been serious about checking for this stuff. We accepted that at the time, so why now are we suddenly so much holier than our former selves? Why is guilt limited to the players? We aren’t really that stupid, are we?

I’m sure that there are plenty of gray areas here, things that could be changed. But I can see where all this logic is going, and I know the solution. If we lose our pathetic need for our athletes to be utterly perfect world leader models for all humanity, and accept that they struggle within an insanely competitive field that demands any edge they can possibly get, we might be able to once again allow ourselves to appreciate what they do, juiced or not.

I guess the cartoon (by Mr. Fish at Harper's) suggests "fool." Me, I'm not sure.

As the economy falls through the floor of the crater, and as populist rage increases, so will nativism and xenophobia, as well as anti-Semitism, which really has been getting worse in the last 15 years and will soon get much worse.

Some relevant quotations:

1) 'George Tenet, the former director of central intelligence, also blamed the Jews for many of his troubles, if the extraordinary scene Tyler describes in the book’s prologue is to be believed. He recounts how in 2004 a furious Tenet, dressed in his underwear, drank half a bottle of Scotch, supplied by Prince Bandar bin Sultan at his palace in Saudi Arabia, in a few minutes, while raging at the Bush administration’s duplicity. “They’re setting me up,” he said, but “I am not going to take the hit.” The hit that needed to be taken was for the missing weapons of mass destruction in Iraq, over which the United States had gone to war. The White House, Tyler writes, expected Tenet “to fall on his sword to protect the president.” ­Tenet raged against the “bastards” in the administration and mocked the neoconservatives who supported Israel’s right-wingers as “the Jews.” He then jumped into the swimming pool and did impressions of Yasir Arafat and Omar Suleiman, the chief of Egyptian intelligence.'

2) 'Jewish leaders said it had never before happened in Venezuela: a break-in with anti-Jewish intent at one of the city's most prominent synagogues. A dozen armed men overpowered guards, spray-painted office walls with anti-Semitic insults, desecrated historic Torah scrolls and made off with computers containing personal information on congregants. President Hugo Chávez condemned the Jan. 30 attack, which has shaken the country's political establishment. But Jewish leaders, supported by Israeli and U.S. officials, have said the populist government's often incendiary rhetoric toward the Jewish state, coupled with rising anti-Semitic diatribes in pro-government media, has helped foster a climate of intolerance that might have prompted assailants to target the Tiferet Israel synagogue. Anger at Israel's recent military strikes in the Gaza Strip against the Islamist group Hamas have sparked demonstrations here and in two countries closely allied with Venezuela: Bolivia and Argentina. But Jews in these countries are concerned about the growing anti-Semitic tone of the protesters, who frequently equate Israel with Nazi Germany, a theme increasingly evident on placards that juxtapose the Star of David with the swastika and in some public pronouncements. In Argentina -- which has the largest Jewish population in Latin America, about 250,000-strong -- Jewish leaders describe a tense climate in which swastikas have been painted on Jewish schools, and graffiti demanding that Jews leave the country have been scrawled on walls....'

3) '"Sen. Mitchell is fair. He’s been meticulously even-handed,” said Abraham Foxman, national director of the Anti-Defamation League. “But the fact is, American policy in the Middle East hasn’t been ‘even handed’ — it has been supportive of Israel when it felt Israel needed critical U.S. support. “So I’m concerned,” Foxman continued. “I’m not sure the situation requires that kind of approach in the Middle East."'

4) 'There's no need to refer to Haaretz's startling revelation that Yisrael Beiteinu chairman Avigdor Lieberman was a member of Kahane's Kach party in his youth: This campaign's dark horse was and is a Kahanist. The differences between Kach and Yisrael Beiteinu are minuscule, not fundamental and certainly not a matter of morality. The differences are in tactical nuances: Lieberman calls for a fascist "test of loyalty" as a condition for granting citizenship to Israel's Arabs, while Kahane called for the unconditional annulment of their citizenship. One racist (Lieberman) calls for their transfer to the Palestinian state, the other (Kahane) called for their deportation. Now the instigator of the new Israeli racism will apparently become the leader of a large party once again in the government. Benjamin Netanyahu has already pledged that Lieberman will be an "important minister" in his government.... Kahane is alive and kicking - is he ever - in the person of his thuggish successor. This is not just a matter of disqualifying Yisrael Beiteinu; it is not even a matter of this party's growing strength to terrifying proportions, becoming the fulcrum that will decide who becomes prime minister. This is a matter of legitimization. All society bears responsibility for it. Kahane was ostracized; Lieberman is a welcome guest in every living room and television studio. Imagine: Ehud Barak does not rule out a coalition with him; Uzi Landau, considered a "democrat," is now Lieberman's number two; a former senior ambassador and a retired police major general also adorn the list...." '

Very very dark days are ahead.

In case you missed it, as reported in the WaPo, Gallup has determined that Vermont is the least religious state in the U.S., and Mississippi the most religious.