naked capitalism

Anonymous says:

U.S. stocks retreated after a Treasury auction of five-year notes drew a higher-than-forecast yield, spurring concern government attempts to lower interest rates will fail amid record sales of bonds.
http://www.bloomberg.com/apps/news?pid=20601110&sid=aV.HncOcfe9M

Don't know how long before this little money printing banana republic implodes under the weight of it's own debt but it's coming down the track like a freight train.

Mannwich says:

I’m surprised he hasn’t quit by now. He must have better things to do with this waning days on the earth. I do suspect that he could be on deck if/when Geithner, Bernanke and Summers fail and are asked to resign.

Jon H says:

Donaldson? Hasn’t he already done enough damage by letting the investment banks leverage themselves to oblivion?

Anonymous says:

This is fine. After G-boy flames out (soon in the coming). Volcker will be left to pick up the pieces. Exactly what is needed. (liquidate the banks, liquidate the farms, liquidate the bondholders)

Anonymous says:

Ever since I took my son on his first major roller coaster ride (Calif Screamin'), I prefer to use this term to describe our current economic situation.

The essence of the metaphor is not in describing the swinging gyrations (even though those are equally valid), but rather the fact that once you're strapped in, there's no getting off until the ride is finished.

The is especially appropriate as you slowly ratchet up the highest point in the ride just before the big plunge. (This is the part where my son was gripping my arm.) You know what's coming ahead, but the sense of time it takes to arrive at the top during the climb seems to move very slowly.

The best part is, that no matter how badly you may want to get off the ride at that point, you're strapped in and there is simply no getting off no matter how frantic & desperate you may become. (He didn't freak out – he just closed his eyes.)

It's only after the ride is over and the restraint comes off that you get to step off onto terra firma. (Of course, in his case, he was so stoked to survive that we had to ride it a few more times before we left. Don't think that's gonna happen in real life.)

Our economic ride will not be over until two things occur:
1. The debt overhang is defaulted & cleared. (All of it, which means corporate bond holders [pensions, SWF, etc] get shaved); and
2. A sustainable economic system based on savings, investment & production replaces the failed asset inflation/credit expansion consumption driven FIRE model.

Everything else is just whiling away the time while we slowly but surely climb the big ride in the sky.

Anonymous says:

Given how the economic catastrophe is the defining issue of this generation, it wouldn’t be a terrible idea to put Volcker in as President and let Obama go back to being a well-packaged, ineffective legislator with very questionable judgement and far too much ego.

Other members of government, like Biden, Clinton, etc. could handle the ‘lesser’ stuff like foreign policy (Obama is proving to be a bust there, too, so what the heck).

It could never happen, of course. But putting in an experienced, highly competent economic expert at this time would be the best we could hope for. Instead, we get Obama, Summers, Geithner, the Three Stooges of handling an economic crises.

What’s that old saw about people getting the leaders they deserve? Guess we haven’t deserved much for quite a while now….

Anonymous says:

One thing I’ve noticed is that it’s called the “Geithner Plan”, I suspect that’s for a reason and it means that if it fails, only Geithner will go, leaving Summers in place. What’s more, Neal Wolin, nominated to be Dep. Sec. under Geithner is Summers’ boy.

So I wouldn’t bet Volcker is on deck. My money is that Summers is on deck. Obama wanted Summers originally and the only reason he didn’t get the job was because of confirmation problems (you know how spiteful us women are). They seem to be protecting Summers (and Obama) by calling this entire thing the “Geithner Plan.” When I doubt it’s really only Geithner’s plan. It’s just he’s the pre-designated fall guy if it doesn’t work.

Leo Kolivakis says:

No, Volcker is not a baby and you are right, he is on board.

I try to leave politics outside my discussions, and I openly rooted for Obama, believing he had what it took to make some real changes, not superficial ones.

I really think he needs to expand his economic team and invite Krugman, Stiglitz, De Long and even Lucas (from Chicago)to discuss the incentives of this plan and whether it will bring about a sustainable recovery.

We need the top economic minds on this financial crisis, not more smoke & mirrors from guys pandering to Wall Street, private equity and hedge funds.

Obama was right: this is a defining moment in history, but I do not think he has the right economic team steering him on the right path.

Finally, some of us who have worked on the buy and sell side can offer you a glimpse of what is going on behind the scenes.

It all comes down to who is benefitting from this plan. And it isn't the hard working taxpayers.

Regards,

Leo

Anonymous says:

volcker and giethner are both trilateral commission members. volcker wouldn’t be doing anything differently.

everyone here should understand that none of this is an accident.

Anonymous says:

Volcker is the Colin Powell of the Obama administration.

Richard says:

You’re all nibbling around the edges. The only issue is: Is Obama wrecking the country by mistake or on purpose?

Bill says:

“… the panel would study tax simplification, tackling tax evasion, AND REDUCING “CORPORATE WELFARE” (emphasis added)

Pardon my french, but WTF !!!

Anonymous says:

With tens of millions of Americans uninsured and a paycheck or two from oblivion, I suspect that Patrick Henry’s “Give me liberty of give me death” is resonating more and more with every bailout and handout to millionaires and scammers and fleecers.

And having little to lose, I bet many of the electorate would support a radical overhaul of banking and monetary policy. In my life I’ve been amazed at the gut intelligence of folks about political/economic matter, even those who aren’t well-versed on things and can’t quite phrase their rebellion in the technical virtuosity of someone who has mastered the language of wonkish quadruplepseak.

It’s disappointing Vocker hasn’t had a more front and center role. His acerbic comments in recent years show he has little respect for the bubble/bailout/bonus approach to running the system. I think he senses, at bottom, how immoral and destructive it is to liberty and the best of American idealism.

He is the only one of the gang that, too my knowledge, fly fishes. Eisenhower did too. IT’s a thoughtful past-time that teaches the rhythms of nature which educate far more than sterile steriod-charged wonkish manipulations. A long walk in the woods would set these guys a little straighter for a time. Just look at the trees and the sky and clear the mind of nonsense and words that lack meaning.

If they were capable of intellectual honesty, they’d have a very receptive American public who would want nothing more than to be part of a great re-constitution of the moral fiber of our monetary and banking foundation.

Why Obama, the great deviner of national zeitgeist, doesn’t see this to its logical conclusions is a bit of a mystery to me. It may be that he, like the rebellious Roman gladiators on the road to Rome, sort of stalls in the face of the nation’s Pater-gravitas superego and loses the inspiration in a burst of sweat and careful confusion.

No, it’s the mother-lode, the great Goddess of Liberty that he needs to elevate. Like the Delacroix painting. Volcker could be the designated driver, while the Penthesus rage at Obama’s Dionysus and come to the same fate as Euripedes penned them too.

Ha ha. That you for your indulgence.

The tax code is no doubt interesting to an accountant. And maybe if we’re lucky there’s a Trojan Horse there that Volcker can cram himself in to. We could only be so lucky. But it would be better if he were front and center, unless I am too sentimental and I might be.

America wants a serious reform. When you have nothing, you have nothing to lose. And if you get dignity as a recompense, then you’re ahead of the game, and your happy that your suffering has meaning. It could be done, now, if they put someone with imagination out in front and have the technocrats of the numerically literate borg follow orders. It would be an intellectual revolution but not a physical one. And capital could still be formed easily for worthy needs. But the idiot savants would not get their 2 and 20 or their VC play money. And the rest of us could save at a 4% or 5% yield.

They day may yet come. I still think we have more sense than the Japanese or the Europeans. We just need to plow through our genial confusion and “benefit of the doubt” temperment to our leaders, and our trust of them not to lie too brazenly. After a while thought, the jig is up. Maybe 6 months from now, it will be. Hopefully Volcker will remain in good health. I hope he is out on the Stream on April 1, opening day of trout season, breathing and thinking, and not in the office.

Tortoise says:

OK, let us try to be positive. Reforming the tax code may be a good job for Paul who is outspoken and does not mind being unpopular. It does not take great expertise, just the guts to call a spade a spade. Like, why not abolish all these stupid housing-related deductions (oh the realtor and developer lobbies) or the health and retirement salmagundi of deductions and regulations (oh the insurance and investment lobbies).

By the way, we now say that Paul Volcker was the best Fed chairman but I can remind you that during his tenure he was also the most unpopular. History may repeat. The average American thinks that all these deductions were for the benefit of his and hers and will scream bloody murder when someone tries to remove them. We all get the tax code we deserve.

Anonymous says:

Volcker is a sad, pathetic man. Proof? He supported Obama, the hard core Marxist. A has been, washed up. Stick a fork in him, he is done.

Edwardo says:

Someone wrote:

"We need the top economic minds on this financial crisis, not more smoke & mirrors from guys pandering to Wall Street, private equity and hedge funds."

Top economic minds wouldn't hurt, but what we really need is more of what aligns with the second half of your sentence, independent actors with integrity. We certainly don't have that now. Secretary Geithner is part of of the problem and his approach leads to a hollowed out state.

Anonymous says:

What about Greenspan joining in with Volker as a sort of patriotic duty?

Steve R. Barbour says:

Yves Smith
We have what is arguably the best Fed chairman ever ready to roll up his sleeves during the worst financial crisis since the 1930s.

Team Obama has asked him to work on…..the tax code.

Eh?

Major overhauls to the tax code show a time horizon as long as 100 years. Likewise other major ‘core system’ changes of society, such as Emperor Justinian’s judicial reforms, can have such major and long term impacts that they are remarked upon by historians 1500 years later.

You won’t however, find many government bailouts/seizures in a 1000 year history… because, frankly, they don’t mean shit in the long term.

To help grasp this, consider that we have hundreds of billions of dollars going to corporate welfare every year. In addition we’ve given away billions and billions of dollars in free ‘bonuses’ to the ‘banking elite’ in the form of favorable tax rates.

etc…
etc…
etc…

This is every year.

Every year.

Even if we assume that this continual looting of society averaged to a mere ‘$100 billion/year’ for the last 30 years, that $3 trillion dollars. Which is, incidentally, more than all the government bailouts thus far combined* — and thats assuming 100% losses from each and everyone of them (a 50% loss rate is probably more realistic).

*(yes, that doesn’t include the ‘guarentees’)

Methinks that if Volker really is as good as you say, he’ll do a lot more good rewriting our taxcode than directing our bailouts. Likewise if he were set on rewriting government regulation of the financial industry. Personally, I’d rather leverage genius over a period of hundred years than over a period of one. And lets be frank, Obama’s first treasury secretary was almost certainly doomed to such a short run.

That doesn’t mean I wouldn’t like to see Larry and Geithner be *cough* ‘replaced’ by someone whose heart seemed to be a little closer to the taxpayers and a little further from wallstreet.

Nor does it mean I’m not more than a little disappointed that Obama hasn’t done anything about those two yet, and didn’t force them to put together a system with less potential for being gamed.

But, Obama still has 43 months left to ‘impress me’ (Nov 4, 2012 is the final deadline).

killben says:

Probably Volcker sees through the nefarious schemes being put forth by Treasury, Fed and FDIC. Being a man of high integrity obviously does not endear him to the various gaming agencies at work (see the post http://www.nakedcapitalism.com/2009/03/has-gaming-of-public-private.html)

Maybe he should put in his papers and have a good life!

Anonymous says:

Volcker has to remain on the sidelines. At age 81 he doesn’t have the stamina to take a front and center role on the firefighting frontlines. And seriously, that would be a waste of his talents. Do you really want him to be the one fielding those loopy questions from “Mad Maxine” Waters, with his penchant for bluntness and not suffering fools gladly? He’d probably just end up like that other grumpy old man Fred Thompson and walk away.

At this point in his life, he has to be a “big picture” guy, not Mr. Detail-Oriented like Geithner.

Reforming the tax code is an incredibly knotty problem, right up there with reforming health care or Social Security. Maybe only someone of Volcker’s gravitas, reputation and credibility can push through simplifications and possibly tax increases.

The one sure way to eliminate budget deficits for the post-recession long term would be to introduce a federal consumption tax, a VAT tax or a Goods and Services Tax (GST) like Canada’s. The idea is probably dead on arrival, but if anyone could push through such a proposal it would be Volcker.

GreatBlog! says:

There isn’t much need or use for Tax Code in socialism.

Anon1 says:

Simplifying the tax code (without the regressive flat tax):

If you BRING HOME between $30,000/yr and $150,000/yr (indexed to inflation) as an individual, you pay 15% with a deduction for your mortgage interest and charitable giving (this means if you bring home ANY income of ANY kind by ANY means).

If you bring home $150,001 to $250,000 as an individual you pay 33%. ONLY deducting charity.

If you bring home >$250,000 then you pay 40%. ONLY deducting charity.

Corporations get taxed based on the differential between their top executive compensation (in ANY form: stock options, bonuses, use of a company mansion, expense account, etc all count) and average worker compensation in ACTUAL US dollars, regardless of where they actually reside. Tax is minimized when top compensation is no higher than 40:1. As compensation goes above 40:1, the corporate tax increases. Using "in ACTUAL US dollars regardless" of worker's actual location prevents gaming the system by outsourcing all your labor to slave labor countries. Paying someone $1/day in slave labor country X means that you cannot pay your top execs more than $40/day to avoid the tax hit.