WaPo cancels paid White House-Congress-lobbyist hook up

Submitted by Edward Harrison of Credit Writedowns.

Just when you thought things couldn’t get any more questionable in Washington, then along comes this (hat tip Tom).

Washington Post publisher Katharine Weymouth said today she was canceling plans for an exclusive "salon" at her home where for as much as $250,000, the Post offered lobbyists and association executives off-the-record access to "those powerful few" — Obama administration officials, members of Congress, and even the paper’s own reporters and editors.

This is not a joke, it was a serious plan whereby the Washington Post was set and ready to use its publisher’s home to bring together lobbyists on the one side and White House and congressional people on the other. Boy, I wish I had that kind of access. But, then again, I would have to pay a lot of money. On second thought, maybe it’s not a good deal. But, hey, if you are a health care lobbyist (the type of lobbyist this event was designed for), then you’ve got the dosh. Why not? Apparently, not every lobbyist felt that way.

The astonishing offer was detailed in a flier circulated Wednesday to a health care lobbyist, who provided it to a reporter because the lobbyist said he felt it was a conflict for the paper to charge for access to, as the flier says, its “health care reporting and editorial staff."

To sum up, the Washington Post, which last nearly $20 million in the first quarter, has made bringing people together another proposed revenue source. In this case, it was to bring together lobbyists and government and was to be paid by the lobbyists for doing so. When some invited lobbyists felt this was a conflict of interest, Politico was able to get its hands on an invite. As a result, the Post cancelled the event.

Oh, and by the way, if you think that U.S. health care reform proposals are not heavily influenced by lobbyists, you might want to read the full account below.

Source

Washington Post cancels lobbyist event amid uproar – Politico

Update 940AM: Below are some additional sources with reports of damage control by the Washington Post.

Washington Post Flap: How They Played It – Karen Tumulty, Swampland
Pay-for-Chat Plan Falls Flat at Washington Post – NY Times
Post Co. Cancels Corporate Dinners – Washington Post

Links 7/3/09

New dinosaurs found in Australia BBC. So Australia has long had different critters than everywhere else, it seems.

Computer reveals stone tablet 'handwriting' in a flash New Scientist

Footage of last ever Michael Jackson rehearsal released Times Online. Yes, this is morbid, ibut I was particularly taken with his dancing. He looks so gaunt. But all that plastic surgery did not ruin his visage as a stage face.

New York City Sees Slide in Tourism Wall Street Journal

Back to the Stimulus Debate: W, Timing, the States, and Baselines Menzie Chinn, Econbrowser. Someone is trying to still say we will have a recovery? The new hope is a "temporary and substantial recovery" aka Green Shoots v. 2.0. This is looking more and more like administering a jolt of electricity to a corpse. Even if you succeed in getting it to move does not mean you brought it back to life.

That ’30s Show Paul Krugman, New York Times

Banks own the US government Dean Baker, Guardian (hat tip reader John D)

China FDI Faces ‘Unprecedented Difficulties,’ Government Says Bloomberg (hat tip DoctoRx)

Rich Harvard, Poor Harvard Vanity Fair (hat tip reader Marshall)

Banks' Bogus Bonuses Heidi Moore, The Big Money. A solid piece.

‘Rogue broker’ blamed for oil spike Financial Times

Recovering ABS may relapse if TALF support pulled Reuters. So the market is argued to need what amounts to permanent life support? Charming.

Terminological interlude Lambert Strether. We need a proper name for this crisis! "This crisis" or "the financial crisis" or "the downturn" does NOT cut it. Lambert nominates "The Big Fail" which I like a lot. Points to both institutional failure and "fail" in the trading sense, which underscores that this wasn't a traditional bank crisis but took place in the brave new world of "market based credit".

New Evidence on the Foreclosure Crisis Stan Liebowitz, Wall Street Journal. Today's must read. Zero equity was the problem, which means the new FHFA 125% LTV program is no solution. We keep sayin' the answer in principal mods, not just payment reductions. but no one wants to hear it. The analysis also suggests a lot of policy remedies are misguided.

Antidote du jour (hat tip reader Barbara):

Willem Buiter: "Why Zombie Banks Will Need More Money"

Willem Buiter touches on the state of bank lending and proposals for financial services industry supervision. Enjoy!

More Book Review Candidates....

Any takers? Some smart publisher types have noticed our reviews and are sending blurbs.

If interested, ping me at yves@nakedcapitalism.com with your coordinates and a bit about your background. Thanks!

The first is A COLOSSAL FAILURE OF COMMON SENSE: The Inside Story of the Collapse of Lehman Brothers by former Lehman VP Lawrence G McDonald. McDonald explores the trillion dollar question of the financial crisis: What the hell happened at Lehman Brothers and why was it allowed to fail? He gives us a real insiders view into the mind of Dick Fuld and the other Brahmins at the top whose addiction to growth lead to the collapse of the nation’s oldest investment bank.

The second is IN FED WE TRUST by Wall Street Journal Columnist and reporter David Wessel. Here Wessel takes a look at the Fed's true power and its role as a distinctly undemocratic institution. Explaining both what happened and why it happened during the great panic of 2008, Wessel provides new insight into how the Fed really works-and the fears Bernake and other key players dealt with as our economy was crashing around them.

BTW we have a good review queued up for Sunday, do check in!

Even More Sobering Unemployment Readings

The dour consumer sentiment readings said that the great unwashed are smarter than the financial talking heads. They had ceased to be impressed with the "green shoots" theory. Lo and behold, worse than expected employment data has proven them right.

We've pointed out that the Carmen Reinhart/Kenneth Rogoff analysis of past severe financial crises suggests that our unemployment rate will peak at over 11%. Given the quality of our policy responses, I see no reason to expect us to do better than the norm. But 11% plus does not seem to (yet) be in anyone's spreadsheet.

David Rosenberg, who has been of the downbeat school of thought throughout the crisis and therefore has had a good series of calls, weighted in before the unemployment figures were released with a pessimistic take on the job market (note that a bold call of his last year was saying the Fed would be at 1% by end of the year for 2008 when everyone else was obsessed with inflation. Of course, they were even lower than that, but the point is 1% looked like a wildly bearish forecast). Rosenberg earlier this week stressed that even when a recovery starts, job growth will be non-existent due to the way hours have been cut.

From Gluskin Sheff (no online version):

A survey conducted by YouGov for the Economist magazine found that 5% of respondents had taken a furlough this year and 15% had accepted a pay cut (see The Recession and Pay: The Quiet Americans on page 33 of this week’s edition).

As wages deflate, workers are looking for ways to supplement their shrinking income base, for example, by moonlighting. Indeed, a poll undertaken by CareerBuilder.com and cited in the USA Today found that one in every ten Americans took on an extra job over the last year; another one in five said they intend to do so in the coming year. These numbers are double for the 45 to 54 year olds who now see early retirement, once around the corner, as an elusive concept.

Most pundits who crow about green shoots and about an inventory restocking in the third quarter giving way towards some sustainable economic expansion live in the old paradigm. They don’t realize, for whatever reason, that the deflationary aftershocks that follow a post-bubble credit collapse typically last for 5 to 10 years. Businesses understand better than the typical Wall Street or Bay Street economist and strategist that everything from order books, to output, to staffing have to now be restructured to adequately reflect a permanently lower level of leverage in the economy.

Indeed, by our estimates, there is up to another $5 trillion of household debt that has to be eliminated in coming years and that process is going to require that consumers go on a semi-permanent spending diet. Companies see this, which is why they are not just downsizing their payroll, but have also cut the workweek to a record low of 33.1 hours. Fewer people are working and those that are still working have seen their hours dramatically cut this cycle....

The op-ed column by Bob Herbert in the Saturday New York Times really hit the nail on the head on this whole ‘green shoot’ issue — how can there be ‘green shoots’ when the labour market is deteriorating at such a rapid clip fully nine months after the Lehman collapse. The full brunt of the credit collapse may be behind us, but please, the other two shocks, namely deflating labour markets and deflating home prices, are very much still front and centre. For every job opening in the USA, there are more than five unemployed actively seeking work vying for those jobs. That is unprecedented and nearly double what we saw at the depths of the 2001 recession. The official ranks of the unemployed have doubled during this recession to 14 million and if you take into account all forms of labour market slack, the unofficial number is bordering on 30 million, another record. For those who still believe that we somehow managed to avoid an economic depression this cycle because of a 13% fiscal deficit/GDP and a pregnant Fed balance sheet, the Center for Labour Market Studies at Northeastern University estimates that the real unemployment now stands at 18.2%, which is actually higher than the posted rate at the end of the 1930s....

When the recovery does come, the record number of people that have been pushed into part-time work are going to see their hours go back up, which will be good for them, but not so good for the 100,000 - 150,000 folks that will be entering the labour force looking for work with futility. The unemployment rate is probably going to rise through 2010, which is going to pose a challenge for incumbents seeking re-election in the mid-term voting season. It may also prove to be a challenge for Ben Bernanke’s re-appointment chances this coming February.

As we said above, companies have permanently reduced the size of their operations with the knowledge of how much credit is going to be available to them in the future to survive because the financial sector is going to be operating under more supervision and regulation and leverage ratios, which means the funds available to support a given level of GDP is going to be measurably smaller than what we had become accustomed to during the secular credit expansion, which really began in the mid-1980s, only to turn parabolic during the ‘ownership society’ era of 2002 to 2007.

What makes this cycle “different” is that three-quarters of the workers that were fired over the last year were let go on a permanent, not a temporary basis. A record 53% of the unemployed today are workers who were displaced permanently — not just temporarily because of the vagaries of the traditional business cycle. This means that these jobs are not going to be coming back that quickly, if at all, when the economy does in fact begin to make the transition to the next expansion phase. In turn, this implies that any expansion phase is going to be extremely fragile and susceptible to periodic setbacks. There may well be job growth in the future in health care, infrastructure, energy technology and the like, but we can say with a reasonable amount of certainty that there are a whole lot of jobs in a whole lot sectors where jobs lost this recession are not going to come back. For example, the 580k jobs lost in financial services; the 320k jobs lost in residential construction; the 1.7 million jobs lost in durable goods manufacturing; the 1.1 million jobs lost in the wholesale/retail sector; and the 380k jobs that were lost in the leisure/hospitality industry. That is over four million jobs that were shed this cycle that are not likely to stage a comeback even after the recession is over. To show you how big a number four million is, we didn’t create that many jobs in the prior expansion until it reached its fourth birthday towards the tail end of 2005.

Compared to that, Mohammed El-Erian of Pimco sounds almost cheerful, but he too thinks the labor market data is worse than the headlines suggest, and echoes many of Rosenberg's themes. From the Financial Times:

What if the US unemployment rate rises above 10 per cent and stays there for an extended period?...

The unemployment rate is traditionally characterised as a lagging indicator...This conventional wisdom is valid most, but not all of the time. There are rare occasions, such as today, when we should think of the unemployment rate as much more than a lagging indicator; it has the potential to influence future economic behaviours and outlooks.

Today’s broader interpretation is warranted by two factors: the speed and extent of the recent rise in the unemployment rate; and, the likelihood that it will persist at high levels for a prolonged period of time. As a result, the unemployment rate will increasingly disrupt an economy that, hitherto, has been influenced mainly by large-scale dislocations in the financial system.

In just 16 months, the US unemployment rate has doubled from 4.8 per cent to 9.5 per cent, a remarkable surge by virtually any modern-day metric. It is also likely that the 9.5 per cent rate understates the extent to which labour market conditions are deteriorating. Just witness the increasing number of companies asking employees to take unpaid leave. Meanwhile, after several years of decline, the labour participation rate has started to edge higher as people postpone their retirements and as challenging family finances force second earners to enter the job market.

Notwithstanding its recent surge, the unemployment rate is likely to rise even further, reaching 10 per cent by the end of this year and potentially going beyond that. Indeed, the rate may not peak until 2010, in the 10.5-11 per cent range; and it will likely stay there for a while given the lacklustre shift from inventory rebuilding to consumption, investment and exports.

Beyond the public sector hiring spree fuelled by the fiscal stimulus package, the post-bubble US economy faces considerable headwinds to sustainable job creation. It takes time to restructure an economy that became over-dependent on finance and leverage. Meanwhile, companies will use this period to shed less productive workers. This will disrupt consumption already reeling from a large negative wealth shock due to the precipitous decline in house prices. Consumption will be further undermined by uncertainties about wages.

This possibility of a very high and persistent unemployment rate is not, as yet, part of the mainstream deliberations. Instead, the persistent domination of a “mean reversion” mindset leads to excessive optimism regarding how quickly the rate will max out, and how fast it converges back to the 5 per cent level for the Nairu (non-accelerating inflation rate of unemployment).

The US faces a material probability of both a higher Nairu (in the 7 per cent range) and, relative to recent history, a much slower convergence of the actual unemployment rate to this new level. This paradigm shift will complicate an already complex challenge facing policymakers. They will have to recalibrate fiscal and monetary stimulus to recognise the fact that “temporary and targeted” stimulus will be less potent than anticipated. But the inclination to increase the dose of stimulus will be tempered by the fact that, as the fiscal picture deteriorates rapidly, the economy is less able to rely on future growth to counter the risk of a debt trap.

Politics will add to the policy complications. The combination of stubbornly high unemployment and growing government debt will not play well. The rest of the world should also worry. Persistently high unemployment fuels protectionist tendencies. Think of this as yet another illustration of the fact that the US economy is on a bumpy journey to a new normal. The longer this reality is denied, the greater will be the cost to society of restoring economic stability.