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Is This the Start of the Big One?

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I don’t believe in market calls, and trying to time turns is a perilous game. But most savvy people I know have been skeptical of this rally, beyond the initial strong bounce off the bottom. It has not had the characteristics of a bull market. Volumes have been underwhelming, no new leadership group has emerged, and as greybeards like to point out, comparatively short, large amplitude rallies are a bear market speciality.

In addition, this one has had some troubling features. Most notable has been the almost insistent media cheerleading, particularly from atypical venues for that sort of thing, like Bloomberg. Investors who are not at all the conspiracy-minded sort wonder if there has been an official hand in the “almost nary a bad word will be said” news posture. Tyler Durden has regularly claimed that major trading desks have been actively squeezing shorts. There have been far too many days with suspicious end of session rallies.

The fall in the markets overnight, particularly the 5.8% drop in Shanghai, seems significant in combination with other factors:

More bank woes. We may be two thirds of the way through the losses, but it could also be as little as half. And despite the stress test baloney, the banking system is undercapitalized by a large margin. Even if the remaining writedowns are smaller in absolute terms than what is, past, they dig deeper into depleted equity bases. Colonial Bank, a $25 billion bank taken out last Friday, was deemed well capitalized until recently. We noted its much bigger neighbor, $140 billion Regions Bank, similarly deemed to be well capitalized, has effectively said it is insolvent How many other banks are broke save thanks to overly permissive accounting? And as we have noted before, the IMF in a study of 124 banking crises, found that regulatory forbearance, which is econ speak for letting the halt and lame limp along rather than taking them out, is far more costly, both in terms of lost growth and size of the ultimate bank recapitalization, than earlier action.

Consumers tapped out. The lousy retail sales report was a reminder of a rather central fact most have chosen to forget.

Foreclosures set to rise. We are not having a housing bounce. Some markets may be close to a bottom, but foreclosures grind on. Even if some local markets are at their nadir, there is so much overhang, between continuing mortgage stress and pent up sales, that much appreciation near term is unlikely. The record of past severe financial crises is that real estate takes over five years to bottom.

Fed in a box. Some e-mail chat pointed out a key fact: the term structure of US funding has gotten very short term. We have become in some ways like a massive bank, borrowing short and lending long. This means the idea of allowing rates to rise on the short end, which has to happen unless we stay in Japanese ZIRP land indefinitely, will be more disruptive than the Fed seems to appreciate.

More AIG losses, I am told more AIG losses are in the offing. There is still unused money out of the total alloted to the rescue, so any eruptions here may not require further official action, but it would have a bad impact on the collective mood, and further taint any efforts to shore up the financial system.

Lack of political leadership. The health care fiasco is going to be a defining event for Obama, in a negative way. His inability to respond effectively to simply absurd distortions of his plan and of the record of public supported programs overseas (including that many are government funded but still privately run, for instance) may dispel the illusion that he is or can be an effective leader. His banking policy, which is vital to recovery, became hostage to Geithner and Summer’s deep loyalty to the industry, and his lack or interest in rocking any boats. All Team Obama has done on the banking front is write a lot of blank checks, hold some bogus “stress tests” in lieu of doing the real thing, and raise a stink on a few symbolic issues to try to paper over the failure to embark on real and badly needed reforms.

Ed Harrison has called him a black Herbert Hoover. If the economy takes another down leg, it will further confirm his inability to do anything other than compromise and try to spin it as success. The confidence game worked when he was a new President, but nice talk and not much action is already wearing thin. We could use someone at the helm who is willing to plot a course and stick with it, and instead what we have is someone long on charisma and short on resolve.

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87 comments

  1. UrbanDigs

    CMBX's, ABXs started to act up a bit after a nice run as credit improved big time over the course of the past 5 months. No way it could last forever. I actually thought the sucking in optimism growth phase would have to last longer, and bring us higher as this rally seemed unstoppable.

    Whole loan books, commercial, HELOCs, financed PE LBO deals, jumbo/prime, etc.. people just act like little kids, out of sight out of mind, that these problems just went away all because of a few FASB acct tweaks and fed credit liquidity swap programs. Eventually it will come out. Whole loan books especially. Sure they dont need to be marked to market, but we all know the marks carried are out of whack with actual value. I think it is not mgmt discretion when to adjust marks as these books start to non perform.

    Fundamentals just got disconnected with the stock markets flawed version of reality. again. Like it did in OCT 2007 and in MAY 2008. stocks were very wrong both times. they can be wrong again. Watch credit. Thats all I have to say.

    As money flies to treasuries and dollars, another round of deleveraging (this time in favorable conditions where you can take profits as opposed to pressure conditions last time), I wonder how corporate bond spreads will look if this continues. Will that feed on itself?

  2. Alfred

    In its second quarter 10-Q Goldman listed 17 accounting changes that is up from six in the third quarter ending August 2008. This is an example of blatant disregard for investors. How can anybody make an investment in a public company that changes accounting rules like others their shirt?

    There is something that is on my mind for quite a while. Unfortunately it has not been resolved yet. So I put the question to you in the hope you can help me. Its about Goldman's 10Q for the second quarter:

    In cash flow from operating activites position 'trading assets at fair value' jumped to $172 billion in 1H09. It was only $28 billion a year earlier. During the nine months ending August 2008 it was $37.9 billion. In October, 2008 Goldman applied FASB accounting change FAS157-3 to its 10-Q. Third quarter ending Aug. 2008 was Goldman's worst quarter.

    Does anybody know detail information about this accounting position, 'trading assets at fair value'? Why is it part of the cash flow statement if it is fair value? Its obviously not a cash position, is it?
    If I am right and it is not a cash position does it fall into the category of non-current assets, and if so is it added back to the income statement?

    I am asking because it could have made a huge contribution to positive earnings results during the last three quarters. As I mentioned already Goldman's financial health was reastablished after FAS 157-3 accounting change in October 2008.

    If you could just point me in the right direction I'd greatly appreciate it.

    http://www2.goldmansachs.com/our-firm/investors/f

  3. Leo Kolivakis

    It remains to be seen whether this is "the big one" or just another gut check selloff. If they keep buying the dips, stocks will head higher. One thing to note: VW and Lego crushed their numbers. If confidence is so low, why are people buying cars and toys?

  4. Troy Ounce

    The Fed said in the August meeting: "In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability."
    But the US government & Fed have only 2 tools left: manipulation & declare war to Canada or whoever is closest and create a shock wave.
    Whatever, we should buckle up!

  5. Anonymous

    Yves,
    I love you and all, but the last person to plot a course and stick with it was your personally favorite President, George W Bush, and I don't believe that his plan was highly regarded by the end. It would only make sense that the next president would be all about negotiation and nothing about fundamental principles…

  6. Anonymous Monetarist

    Sure would seem to be a D-thang…

    As Dalio recently said in Barrons' :

    'There are too many nonviable entities. Big pieces of the economy have to become somehow more viable. This isn't primarily about a lack of liquidity. There are certainly elements of that, but this is basically a structural issue. The '30s were very similar to this.

    By the way, in the bear market from 1929 to the bottom, stocks declined 89%, with six rallies of returns of more than 20% — and most of them produced renewed optimism. But what happened was that the economy continued to weaken with the debt problem. The Hoover administration had the equivalent of today's TARP [Troubled Asset Relief Program] in the Reconstruction Finance Corp. The stimulus program and tax cuts created more spending, and the budget deficit increased.

    At the same time, countries around the world encountered a similar kind of thing. England went through then exactly what it is going through now. Just as now, countries couldn't get dollars because of the slowdown in exports, and there was a dollar shortage, as there is now. Efforts were directed at rekindling lending. But they did not rekindle lending. Eventually there were a lot of bankruptcies, which extinguished debt.

    In the U.S., a Democratic administration replaced a Republican one and there was a major devaluation and reflation that marked the bottom of the Depression in March 1933. '

    The bullisht crowd wants to jump up and down about 1938 fast-forwarding over the earlier part of that decade … this seems premature.

    Even see 'em pulling out 1907.. an analogous event to today if we didn't have the Fed …

  7. patrick neid

    "Lack of political leadership. The health care fiasco is going to be a defining event for Obama, in a negative way. His inability to respond effectively to simply absurd distortions of his plan and of the record of public supported programs overseas (including that many are government funded but still privately run, for instance) may dispel the illusion that he is or can be an effective leader."

    His plan? Like most Congress people he has no idea what is in the plan and its footnotes. He is not writing it. The reason he is having major problems with it, deservedly so, was having tried to rush it through Congress on a trust me basis. Thank god the people you dislike called the Dems out on this BS. Maybe, just maybe if we take some time and discuss every paragraph we can get a good reform package. While you may embrace government intervention where you deem it, many of us loathe it as a first, second or even third step.

  8. Anonymous

    Decisive leadership?

    I've said repeatedly: we need a Roosevelt… either Teddy or FDR would do. But that is not what we have.

  9. LeeAnne

    "Ed Harrison has called him a black Herbert Hoover."

    What's the difference between a 'black Herbert Hoover,' and a Herbert Hoover, or a Lincoln or a Roosevelt for that matter?

    The remark and repeating it is jarring; it just calls attention to the fact that Harrison is black.

    Its very annoying (distracting from the point that's being attempted). Is this necessary? It compromises everyone, readers and writers alike.

  10. PascalBMontreal

    I agree 100% with every word, Yves. Obama was all about hope. He is now all about deception and cynicism, and he asked for it.

    We needed resolve and vision. We have more of the same: public-to-private wealth transfers, window dressing, incredible (yet empty in terms of real meat) speeches, etc.

    And Yves: we ARE in ZIRP world. Make no doubt about it. The short end will remain low. The main question is how incredibly deep the Govt Bond market really is, which will indicate wehere the long end is going. Given poor equity and real estate market potential, I guess the demnand for bonds is close to infinity at all horizons, hence very low interest rates are there to stay, with no inflation.

    The elepehant in the room is debt burdens at ALL levels – households, govt, etc. As long as the deleveraging process has not run its full course, we will see no viable recovery. My take is for a viable recovery in 2015, since Obama seems to want to stretch the hurting by NOT bringing the deep structural reforms to financial markets (and to many other parts of the economy) that are so badly needed to bring about the long run growth momentum we need (not artifiacially supported by unsustainable steroids).

    The US has become a captured democracy, to use Acemoglu's words!

  11. Kelli K

    LeeAnne,
    I think you're being a little oversensitive. Harrison is a respected team member and for a long time I had no idea what his background or phenotype was, nor does anyone care. I'm not even sure who on the NC team is Canadian and who is American. Does it matter?

    Obama is the New Hoover. Is that better? He's also the New Carter. You're right, the color of his skin is irrelevant. The content of his character much more so.

  12. jm

    Obama as a second Hoover, rather than a second FDR? I was telling friends that six months ago. I wish I could say that it's nice others are coming to the same conclusion. Sometimes one would be much happier being proven wrong.

  13. FairEconomist

    Hoover was a good president who did a lot of the right things, but not *enough* of the right things for the crisis he faced. Carter was a very sharp guy who pushed for farsighted policies like energy independence but who couldn't manage his image or sell the policies to the American public. Obama, who is great at PR but is pursuing a course only moderately better than Bush, is a lot like Hoover but not like Carter *at all*. Great at image, weak at policy.

  14. dogeatery

    AsaAs a progressive who voted Nader out of principle, I can't say I'm too surprised by Obama's lack of substantive action, but the fact that it looks like he's caved on his only reform principle, the public option, shows what a "leader" he actually is. He'll dress it as "compromise," never minding that 46 million Americans will continue living in fear of every toothache.

    The big conservative criticism of Obama turned out to be true: Al flash, no substance.

    /bangs head into wall

  15. "DoctoRx"

    IMO Obama has the same charisma as a slick pitchman.

    He's a front for Big Finance.

    Re BO and health care, any White House worth caring about would have presented a plan to Congress. This business of multiple plans is at best a rookie mistake.

    What about the LBJ analogy: enlarged social programs at home while ramping up a to date marginally successful land war in Asia?

    Re the stock market, my review of the correlation of the leading indicators suggests that by the time they are as bullish as they are now, the stock market trends down over the next months to year or more. IMO most stocks are fundamentally overvalued given their inherent riskiness and the sad fact that the insiders run the companies with their interests first and outside shareholders' interest last.

  16. 1/2&1/2

    since we're on the quibble on one's skin color (since all of us in America are still obsessed with the surface of things):

    the fair Mr. O is not all black. as he described himself, he's a "mutt". for most of us born pre-1970, that is not an important distinction. but ask any teenager or 20-something living in NY/SF/LA anywhere (especially those with mixed racial heritage) and they'll tell you much differently.

    why is this important? because there may be a point sometime soon where Mr. O is going to have to start making decisions from the mutt within to prepare for the future instead of continuing repeating past mistakes from both pure sides of his ancestry, otherwise his real *base* — those youth — will begin to question whether the system that their role model succeeded in is worth even keeping around for the next generation of american babies.

    and if he doesn't know that now, hopefully his daughters will save the day…

    …take it for what's it worth…

  17. whitey_b

    Please stick to listing links, if this is the kind of "analysis" that you are providing on your blog.

    Not much value otherwise.

  18. SiriusPsycho

    I'll dare to suggest that today's market is simply to squeeze dollar shorts and make some money…….and goose the dollar.

    BTW, I agree that calling Obama a "black" anything adds no information about him, but only calls attention to the endemic tendency that still resides even in the best and brightest of us, to think that noting skin colors adds important descriptive or evaluative information — it doesn't, unless you're a census taker.

  19. Brick

    I don't think it will be the big drop that many are expecting and the reason will be sentiment amongst a minority of the economy. I see evidence that the upper echelons of society are in recovery with remuneration and even house prices seeing some slight recovery. This will skew statistics, mask many problems and it will take much further hardship on the rest of the economy before this sector declines. Where this segment of the economy goes so will stocks regardless of the building imbalances.
    I do think you have missed some important criteria of your list though and it is these that will eventually tell. House prices will not rise significantly until more modest wages rise, despite the average American itching for house prices to start climbing again. The important criteria you missed out was that equity withdrawal which accounted for probably above ten percent of consumer spending is not coming back soon because banks are currently taking huge hits of this kind of debt. We also have those who have not paid their mortgage for over a year finally being foreclosed which will also hit consumer spending. Lastly on the consumer spending side we have discretionary spending being redirected towards the auto industry. Cash for clunkers still requires buyers to get into more debt and the interest rates being charged could well mean further losses down the line.
    The elephant in the room for me though is tax receipts which I expect to fall away even more significantly than forecast as middle class families suffer from salary squeezes and redundancy. This is important in relation to container traffic which has shown a marked change over the last month from imports having crashed to both imports and exports having crashed. This suggests to me a greater need for government deficit at a time when GDP might suggest reduced need for foreigners to buy the debt and QE is coming to an end. Eventually once more money will cycle from stocks, to commodities to government debt, taking weaker banks down and painting red ink all over balance sheets.

  20. VA Doc

    Yves, well written and demonstrative of some backbone – sadly missing in the electorate today.

    Criticize the chosen one (BO) and the hard left jumps to claims of racism. May they keep doing so, as it is yet another evidence of the fraud that this president and his team are, and exposes the empty core of their beliefs.

    The promises of yesterday's campaign are coming up empty; I'm an independent who was fooled into voting for BO – never again will I align myself with the hatred and deception of the hard left.

  21. LeeAnne

    Yes it does matter; 'black' as in 'black Herbert Hoover' was discordant, begging an explanation.

    The explanation is that Harrison is black. The remark as stated would not have been considered quotable had it not been made by a 'black' man.

  22. MAG

    VA Doc,

    You might want to check up on some of your terminology. I know that Fox and their cohorts like to pretend that Obama has something to do with the "hard left," but in reality only a very small portion of the actual left was ever fooled by Obama. For the record, there is no left in mainstream American politics. Hit the books a bit before you start throwing around meaningless epithets.

  23. Lavrenti Beria

    A fine summary!

    Perhaps the most telling point is your evaluation of the political aspect. This clown has proven himself in just instance after instance to be the very converse of every hope he encouraged the American people to develope about him. He presented himself as a kind of blank slate on which one could write what ever one wished – Hitler, interestingly, did exactly the same thing during election campaigns in early 1930s Germany – and now all they have for their naivete is the underlying blank slate. And that's all they'll ever have. Barak Obama is a disaster and he's been a disaster from the very outset.

    What ought to painfully clear to anyone with half a brain in this country is that our present system, so thoroughly corrupted as it is, simply will not respond to electoral sentiment. The Democratic Party has a veto proof margin in the Congress yet cannot pass a health care bill. The franchise has been reduced to an abstraction. Mass demonstrations and the general strike are now the only devises that remain to a people that have had their democracy stolen from them. If todays's market developments in fact auger a second downleg in both the market and the economy, there will come a point where public will grasp fully what the reality is that faces them. Then, all the emptiness that has been American politics since at least the 1970s will be in for a rude shock.

  24. bob goodwin

    I prefer the analogy of bush/obama to pierce/buchannan. seeming opposites who did exactly the same as each other and leading to crisis

  25. Bob_in_MA

    One reason I think this may be a big leg down is that now all sorts of people are focusing on the unsustainable debt levels, and that's a story that is neither going to go away, or be solved by dead cat bounces in GDP or industrial production.

    I also think that the recovery in assets (equities, bonds, housing in the UK) was not only self-sustaining and self-confirming, but actually was aiding the economic stats, like consumer spending.

    If assets reverse, they will now have the reverse effect on retail sales, etc.

  26. Alexandra

    LeeAnne said..
    "Ed Harrison has called him a black Herbert Hoover."

    What's the difference between a 'black Herbert Hoover,' and a Herbert Hoover, or a Lincoln or a Roosevelt for that matter?

    The remark and repeating it is jarring; it just calls attention to the fact that Harrison is black.

    Its very annoying (distracting from the point that's being attempted). Is this necessary? It compromises everyone, readers and writers alike.
    ———————————–
    Have you ever wondered whether or not the (predominantly white male) elite knew that this crisis must be coming?
    If they did know that this crisis was coming, why did they push for an inexperienced young black guy to be at the helm in such a critical time?
    Do you really think it is Obama who calls the shots?
    'nuff said.

  27. SocialismSucks

    The die was cast when Obama nominated Geithner in early December. That single action meant that the whole ballgame was going to be a giant fix. Obama is indeed a frontman for the Oligarchy…like the rest of our recent presidents. Apparently a candidate can't get near the Oval Office unless he makes his deal with the Oligarchy first. Isn't that nice?

    So, here we are: trapped between the banker-funded Left and the banker-funded Right. Meanwhile Liberty is going up in smoke…just as the Founders warned.

    Early America was remarkable for its virulent antipathy to the bankers. The Founders (except for Hamilton) essentially declared themselves to be at war with International Finance. The money coining section of the Constitution was perfectly clear on this matter and that is why it was subverted by the bankers completely…subverted decade after decade right up to this morning's absurd comments by Federal Reserve PR flack Mishkin on CNBC.

    In the old days criminal bankers were tarred and feathered. And for good reason: because their crimes can devastate entire societies. But that wisdom was all flushed down the memory hole by the powers that be and now modern America will relearn the lesson the hard way: If you, dear citizen, don't have the courage to hang criminal bankers, then criminal bankers will hang you.

    And, no, this doesn't mean that the problem is capitalism. The problem is corruption.

  28. ronald

    The big one will be when the financial sector losses it grip on the political process until then its another ride on their roller coaster.

  29. Ruy Lopez

    Maybe realizing that he's going to be a single-term president will inspire Obama to kick some ass – since he won't have anything to lose.

  30. fresno dan

    Your exactly right. For us in the reality based community, confidence only takes you so far. Soon, people will actually start to taste their cappuchino, and will be shocked, shocked to discover that it is dish water.

  31. Anonymous

    Agree that Obama is been viewed as lackluster leader-he can't even get his majority Democratic party to support his health care plan. On a conspiracy level, I got to think the financial oligarchs that are running the US government purposely send Obama out to debate a lame duck health care plan that would keep the public's mind off the financial crisis.

  32. Anonymous

    Cash for clunkers still requires buyers to get into more debt and the interest rates being charged could well mean further losses down the line.

    This is not true. I recently used the cash for clunkers program to buy a brand new car. We used cash. There was no debt involved.

    the majority of people may very well go ahead and use debt, but it is not a requirement of the program.

  33. Purple

    The bigger question is why people are surprised. Nothing in Obama's past would indicate he is someone to rock the boat. His first major promoter on the national scene was Brzezinski, one of the most unapologetic advocates of American imperialism.

    A less educated people is one that is easy to manipulate.

  34. Yves Smith

    I will take issue with the "black Herbert Hoover" pushback, although it is admittedly not considered a safe topic in charged America. Since I score as slightly biased in favor of blacks in the Harvard Implicit Bias tests, which is reputedly hard to override consciously, I like to think I am not terribly biased, but we all tend to kid ourselves on this topic.

    I was disturbed, and said so on this blog, by how much was being made of Obama's race at the time of his inauguration. It demonsrtated how little progress we have made, It seems fine to not merely to bring race up, but to go on about it at great lengths in some contexts, and verboten even to make mention of it in others.

    Obama is mixed race, He could just have easily chose to position/see himself that way, as Tiger Woods does, but he didn't. I have no idea whether this was a political or personal choice.

    The reason this matters in this context is the fact that he is black makes it less likely that his Herbert Hoover qualities will be called out.

    The projection based on his race is to see him as being fare more left wing than he is, I can't recall the number of times he has been branded as a socialist, when vastly more aggressive intervention and government action, starting with the Freddie/Fannie conservatorships adn teh non-nationalization nationalization of AIG, plus the large increase in the Federal budget, took place under Bush. True conservatives were very unhappy with Bush on this front, but few others made much of his actual versus perceived positioning. He and Obama seem to be going down a path of Mussolini-style corpocracy. Yet Obama gets the "socialist" brand, I don't think that is merely the result of his being a Democrat. Any "minority", be it black, Hispanic, female, American Indian, would be more likely to be attacked on that basis. The tacit assumption is they identify with the rainbow coalition as a result of their personal background, and therefore assumed to favor redistributive policies.

    It is fair to say that Obama has called for more taxes on the wealthy, but again, his proposals are merely a fairly minor reversal after very large concessions made by Bush to the top income groups. He is attempting to carry the Democratic mantle on some issues, but his stance on Pentagon budgets and the banking industry have a more in common with the Bush position than not.

  35. Anonymous

    Our president's genealogy/history has a roadblock in place, no one is sure who he really is.

    In his defense, there is no practical fix to what ails us. Just liquidation.

  36. DownSouth

    LeeAnne said…"What's the difference between a 'black Herbert Hoover,' and a Herbert Hoover, or a Lincoln or a Roosevelt for that matter?"

    Could it be that, hidden away in the deepest recesses of Edward Harrison's mind, as well as the minds of many others, was the notion, or the hope, that because Obama is black, he would or could somehow redress the intractable social ills that plague our lives? Could it be that he rekindled some of that 60s idealism of the civil rights movement, "it's determination to act, its joy in action, the assurance of being able to change things by one's own efforts," as Hannah Arendt put it? Could it be that there is a backlash now that people are discovering that Obama is merely human, just like you and me?

    Given the exaggerated role race has played in America, and continues to play (as the Henry Louis Gates, Jr. embroglio showed), I don't see how any realistic discussion of American history, politics or economics can take place without talking about race. And pretending that it doesn't exist doesn't make it go away. I also don't understand how the need to be sensitive has taken priority over the need to discuss our social problems freely and openly.

    Obama is the crowning jewel of the civil rights movement, its fruition beyond anyone's wildest dreams. But he is also becoming emblematic of its failures. As Arendt reminds us, the organizers of the civil rights movement "for a time had a quite extraoridinary success, that is, as it was simply a question of changing the climate of opinion–which they definitely succeeded in doing in a short time–and doing away with certain laws and ordinances in the Southern states; in short, so long as it was a question of purely legal and political matters. Then they collided with the enormous social needs of the city ghettos in the North–and there they came to grief, there they could accomplish nothing."

    I believe, as Arendt did, that the crises facing America far, far transcend race. However, race is very much part and parcel of those crises, and a study of America's racial past, and especially of the civil rights movement and its successes and failures, offers a tremendous insight into what ails the republic.

  37. DownSouth

    (continued)
    That study cannot happen, however, because of what Richard Bernstein calls the "Sensitivity Gestapo." Its moral smugness and self-righteousness adds

    yet another coating of mandatory sanctimony to a society that already has trouble talking about things frankly and honestly. It is, quite simply, an attack on freedom and autonomy for people to be pressured, or required, to attend chapel and told what it is proper to think, to feel, and to believe. The whole point of the liberal revolution that gave rise to the 1960s was to free us from somebody else's dogma, but now the very same people who fought for personal liberation a generation ago are striving to impose on others a secularized religion involving a set of values and codes that they believe in…

    –Richard Bernstein, Dictatorship of Virtue

  38. Kelli K

    "On a conspiracy level, I got to think the financial oligarchs that are running the US government purposely send Obama out to debate a lame duck health care plan that would keep the public's mind off the financial crisis."

    Whoever said that, I am on your wavelength. Get people to vent their spleen on something that hasn't even been written–sheer genius (I credit Axelrod). We are manipulated and sidetracked at the critical moment.

    The press is pitching in for Team Obama as well. Yesterday's front page story in the WaPo caused a helluva storm–more than 700 comments on a piece about a divorced mom in Westchester "struggling" to keep the $2.5 million house together, etc. Nevermind that she is a debt slave like everybody else in the country, the hordes were baying for her blood. It got quite ugly.

    Meanwhile Bill Gross takes his share of the TARP bailout and buys a $23M mansion, and some jerkoff speculator at Citi is set to walk off with $100M. That's ok. Focus on blond middle-manager. Here's the circus, where's the bread?

  39. Anonymous

    I mean this question in all seriousness – what did you expect him to do versus what he did??? What were the alternate scenarios that didn't get played out.

  40. Anonymous

    Wow, just wow.
    While I would be the last one to defend Obama, the way that the GOP is completely ignored in many of the tirades here is nothing short of stunning. If you look at the absolutely insane pushback from the loons on the right and their corporate media whores, you get a taste of exactly what Obama is in for on every front. He's supposed to change the banking culture? Jeebus, the fruitcakes are already comparing him to Hitler (even here apparently) over every step their whacked-out perspective sees as 'socialist/fascist'.
    What many see as a sell-out, I see as a man held hostage by the reality that the government is still owned by the banks and corporations. The Senate still has a pro-banking, pro-corporate majority, party affiliations be damned. And the so-called librul media has parroted every damned lie these bastards have uttered, and glossed over every substantive word Obama has spoken as if he was the one talking lies and bullshit, and not his corporatist opponents.
    Frankly, it's hard for me to imagine that many here have been paying attention to DC politics for the last two decades. Obama isn't gutsy, that's a given, but even if he was, only a fool would think that he could get much done with the culture of corporate corruption with which he's splattered every day.
    Oh, and the sick obsession with whether the economy is (finally!!) about to topple is disgusting. I've been hearing this for nearly 9 months now, and I'm tired of this twisted, almost perverse fascination with calamity. Go ahead, keep hoping for the big fall, but when it doesn't come this time either, consider getting some therapy, or some meds, or both.
    /rant off.

  41. LeeAnne

    I couldn't make up my mind between Hillary and Obama -wasn't crazy about either of them but I was definitely gonna vote Democratic -so I voted for Obama and was thrilled when he won; the Bush years had taken their toll on me; given me a picture of my country that was horrifying.

    A sister of mine in Oregon who is politically reasonable but not interested in macroeconomics was thrilled with Obama, one of those who thought because along with his talents he was also black and therefore full of promise; it was not easy for me to throw a little cold water on her enthusiasm telling her that I thought he was potentially a demagogue, that his ghetto speech (sounding like Farrakhan) put me off, and I would just have to see.

    The brazenness with which he has defied the American people counter to everything he campaigned for harkens me back to when he accused Bill Clinton of being a rascist -it was lower than anything I had ever heard in politics and more shocking.

    Obama is a small man with a big mouth. His one experience with finance, the purchase of his personal home in Chicago is both pretentious and crooked. That he is black is relevant only for helping American Blacks with self esteem issues and setting an example for achievement. Period -end of story.

  42. Hugh

    You could add job losses, commercial real estate, piddling efforts to pursue the millions of cases of fraud, and the non-removal and reining in of the worst of the banksters and their firms (and yes, I mean Goldman in particular).

    As for Obama, healthcare and the economic crisis are only two of many areas where he has failed to change from Bush or show leadership. There is the ongoing lack of reform at Justice, the continuation of many Bush era cases using exactly the same dubious legal rationales, everything from state secrets, Don't ask don't tell, 6th Amendment right to an attorney, fighting well founded habeas petitions (pretty much everything that was going on with Bush litigation), no real pull out from Iraq, escalation in Afghanistan, moving operations from Guantanamo to Bagram, domestic spying, refusal to investigate or prosecute Bush era illegalities. Except for stem cell research and the release of a few OLC memos, there have been no breaks with Bush.

    But, of course, it is not just Obama but the Democrats in general who have been backing up his status quo-ism. And this gets to the larger point that Obama and the Democrats aren't really being pushed anywhere they don't already want to go by the Republicans. What we are seeing play out is the Obama/Democratic agenda. The Republican agenda is even crazier but both have failure written all over them. So despite the greenshoots talk, the country's fundamental problems are being addressed by neither party. We should expect various wasteful, ineffectual efforts that may muddy the waters somewhat but not really change an overall downward trajectory to depression in 2011.

  43. LeeAnne

    Furthermore (pardon the spam) all Obama has to do is propose and promote a public option that would expand Medicare to everyone who wants it.

    He could do that if he was listening the needs of the people; if he had not sold out in advance to pharma and the health care lobbyist scum; if he was a leader.

    He is not a leader. He's a sellout and a fraud. A small man who can easily talk about washing your hands to prevent flu, having a couple of beers with a couple of guys over a petty police action, bringing his kids with him to Moscow to a high level meeting like it was a trip to Disneyland while one parades around in an anti-war t-shirt -yuk

    Senator Al Franken for President!!!!

  44. al fin

    Wow, just wow. Obama's clownlike amateurism takes the cake. The man is not qualified to take out the garbage, much less make national and international decisions with multi-decadal reverberations.

  45. Anonymous

    Love that Richard Bernstein quote.

    "…but now the very same people who fought for personal liberation a generation ago are striving to impose on others a secularized religion involving a set of values and codes that they believe in…"

    What utter nonsense. And what price, pray tell us, will those who refuse to obey this "secularized religion" have to pay for their blasphemy? I'd love the list of punishments being doled out by the ever-so-powerful secularists.
    The whining by comfortable, white, judeo-christian white people is insufferable. It's as if every plea for tolerance and real equality from the less powerful minority is an affront to the basic right to be a self-important douchebag.

  46. Anonymous

    LeeAnn said:

    "Furthermore (pardon the spam) all Obama has to do is propose and promote a public option that would expand Medicare to everyone who wants it."

    Really? That's all? And then those blue-dog Dems who refuse to part ways with the wingnut GOPers will just fall into line huh?
    If Dick Armey can go on network TV and state that he thinks Social Security and Medicare are "tyranny", and he's not crucified, nor are the GOP/DINOs for agreeing with him, what chance does Obama really have at a public option? Seriously, what are you watching, faux snooze?

  47. Anonymous

    LeeAnne I call bullsh** on your democratic voting record or your feigned horror at the Bush administration. Most of your posts read like Fox news copy.

    Ditto on all points in Anonymous' at 3:20. It would be hard enough getting anything accomplished without having a 24 hour news feed that is hell bent on ensuring your every decision is mischaracterized and framed in failure.

    Most people I know are well paid, have health insurance, pensions, union protection, etc. The despite Obama and oppose his every move. In short, they have no dog in the fight and so can cavalierly run thought experiments on whatever reality suits their emotional fancy.

    In hindsight I wonder if Obama should stop enabling these Americans before he starts posing questions about what to do. As JFK let McCarthy hang himself and Bill Clinton let "contract-with-America" Gingrich explain why the social security checks weren't in the mail.

  48. Kelli K

    Anonymous said

    "What many see as a sell-out, I see as a man held hostage by the reality that the government is still owned by the banks and corporations. The Senate still has a pro-banking, pro-corporate majority, party affiliations be damned."

    To be sure. But then what did POTUS do to alter the situation when his own fellow IL senator Dick Durbin asked for his help with cram-down legislation? Left him hanging. Obama leaves everyone hanging. That is the opposite of leadership. There is no one to blame but the man himself.

  49. Anonymous

    Nice posting Yves, thanks!

    I have been waiting for over 40 years for the economy to tank enough to provide for the opportunity to change the direction of capitalism from greed to more sharing or at least equality of opportunity based. I am not sure that I am willing to bet that now it will really happen but am supportive of any event that will stop the anti-social madness.

    psychohistorian

  50. PascalBMontreal

    This post started out with a big economic question and finished with a lot of exchanges about race and colour.

    Maybe it's me who is Canadian and doesn't see the big deal, but really, I just don't see any pertinence of all this black, color, etc. debate. I have black, Arab, Jewish and hispanic friends! I couldn't care less if my President or whatever was black or female or gay or even a cocaine user (as long as he/she is functional) or whatever. What matters is POLICIES!!!! And MAN do we get plenty of BS out of Washington on this front. And yet strangely THAT is what is precisely NOT being discussed to any interesting intellectual depth, especially on the economic/regulatory reform front!

    But I am sorry – maybe I am not sensitive to your US-specific race/color issues!

  51. Yves Smith

    Anon of 3:20,

    People seem to forget the crisis that Obama inherited, and the opportunity he blew. When Roosevelt took office, he announced key elements of his new program in his inauguration speech and started taking action immediately. Instead, we got Turbo Timmy who announces a non plan plan weeks later, with enough of a rough outline of where he is going to give the industry time to mobilize against the few elements not to their liking.

    I disagree completely that Obama could not have done more. The economy was clearly issue number one. What were he and his team doing during the transition? Knitting? They certainly weren't doing much planning. He had a tremendous opportunity to take ground early and muffed it. There was a reason Roosevelt had his hundred days. If you are going to be bold, you need to move quickly.

    As for the ad hominem attack on the market musings, I find it amusing that calling a manipulated and toppy market what it is (which does not mean it can't go higher, as the dot com era attests), is deemed to be a sign of some sort of mental disorder. If so, as I indicated, a lot of successful professional investors share this pathology. I'd venture to say this could also be projection on the writer's behalf.

  52. Leo Kolivakis

    From Richard Barley of the WSJ on Differing Market Views:

    http://online.wsj.com/article/SB125052045545737025.html

    Since the nadir in March, U.S. stocks have gained close to 50% and investment-grade credit spreads have halved, rallying in tandem as panic over a financial collapse has dissipated. But with the focus now on economic recovery, despite Monday's global stock market selloff, a disconnect is developing.

    Credit-default swap indexes that usually move in line with equities have begun to follow their own tune — one with a more downbeat tone on the outlook. U.S. stocks hit new 2009 highs last week before losing some ground, while the investment-grade CDX and iTraxx indexes underperformed sharply. Even with a 0.6% decline on the week, the S&P 500 closed off the week's lows, while the 12-basis-point widening in the CDX took the index to a level not seen since July 24.

    Equity investors appear focused on the surprising resilience of earnings and the potential for punchy profits if revenues rebound; Credit Suisse forecasts a 20% rise in 2010 S&P 500 operating earnings, giving the market a price/earnings multiple of just 14 times, below the long-run average. Credit investors seem more concerned about how sustainable any recovery might prove, and are inclined to require more proof that demand is picking up. Cash bond spreads are now at levels comparable to those reached as a result of the 1981-1982 and 2001 recessions, rather than at 1930s Depression levels. But defaults are still climbing and credit deterioration continuing.

    Of course, credit and equity investors may be looking at the same picture through different lenses. Equities tend to be more sentiment-driven and focused on potential gains, while credit markets are always more concerned by potential losses. Besides, spreads cannot tighten indefinitely, so credit investors are likely to see diminishing returns from here, given the scale of the rally they have already enjoyed. Bullish sentiment and liquidity — with huge amounts of cash still in money-market funds that could be deployed in stocks — may trump jitters about the recovery.

    Still, the biggest threat to both equity and private credit markets may be the government bond markets. A real recovery that led to a rebound in risk appetite could yet push government bond yields — which may be artificially low due to unconventional monetary policy — sharply higher. That could upset both corporate bonds and stocks.

    >>I still think we are heading higher from these levels and this dip will be bought.

  53. Gentlemutt

    Yves, you touched on a key fork in the road selected by our President. His personal choice of marriage partner, especially given Mrs. Obama's own youthful writings on race while a college student, and his numerous early choices about political partners reflect that. Mr. Obama decided not to emphasize his particular version of the widespread muttiness that helps so much to bind this society together.

    Injecting himself foolishly into the Harvard yard squabble, and thereby squandering some power of the presidency as well as his own, was just the latest in a string of acts by which Mr. Obama has signaled his viewpoint and intentions on matters of race.

    It is a shame, really, since when more relaxed he seems happy to acknowledge the hybrid good fortune visited upon him, as for example when he expressed a personal preference for an old-fashioned mutt for the prospective family dog by making a reference to himself as such.

    He is wasting a great asset, even after that asset helped get him elected, and that is important because it leaves him less public goodwill and therefore less time to shed the legacy Rubinesque advisers and make his own administration before the Hoover tag sticks.

    Hoover complained bitterly after the fact about his inability to stop the 1929 bubble and crash. One can imagine former President Obama someday lamenting, too late, all the bad advice upon which he acted, especially in the early days of his administration.

  54. Doc Holiday

    FYI: Digg has partnered with The Wall Street Journal for an exclusive interview with U.S. Secretary of Treasury Timothy Geithner. Alan Murray, Deputy Managing Editor of The Wall Street Journal, will be asking him the most popular questions as submitted and voted upon by you. From now until Thursday, August 20th at 12 Noon PT, you can submit and Digg up questions to decide which will be asked.
    http://digg.com/dialogg/Timothy_Geithner_1

    FD: I need a bike ride.

  55. Anonymous Jones

    I'm back from vacation. It took me hours and hours to catch up on the postings and comments from just ten days missed! Beautiful stuff from DownSouth on Orwell/Dickens and Arendt.

    I can't believe I'm going to say this because I love being anonymous, but the level of the comments has surely deteriorated since the anonymous ban was lifted. What in the world do people think they are accomplishing by labeling Obama a "clown," an "amateur," and a "disaster?" He is none of these things. I am no fan of many of his policies (or perhaps even most of his policies now), but surely calling this man who is very educated and obviously quite bright a "clown" serves to harm yourself more than it serves to harm Obama's image. I'm telling you this for your own good, commenters…seriously. It makes you look like idiots (and I mean that in the nicest sense of the word). It is difficult to believe that many of the commenters here would exceed Obama on any tests, whether they be based on intelligence or knowledge.

    I wish Obama did everything that I think should be done in this world. He clearly will not be doing so. This does not make him a clown.

    Sometimes it really makes sense to consider the limitations of your own knowledge (not to mention the vast universe of opinion among people with similar knowledge) before lashing out in anger and with invective because you are *so sure* that you are right about something. Just a suggestion.

  56. Anonymous

    Lolaments at the idea that one's education or intellect precludes one from being a clown, an amateur or a disaster.

    Human beings are not omnipotent or omniscient, and in fact are nowhere close, almost such that they embody the opposite of those words. Human existence is a daily battle against one's own ignorance and limitations.

    We are all clowns, amateurs and disasters in the most areas of knowledge and the great majority of areas of human accomplishment.

    Its patently obvious Obama, while a brilliant man, is not well educated, schooled, experienced and knowledgeable in matters of economics. That he has a big brain and nice diplomas and enviable achievements does not obscure this obvious and salient fact.

  57. Anonymous

    Anonymous Jones: Just tell us we are un-American. Complaining about status quo and leadership in a forum is about as civil as you can get. If we had a popular president and Congress then we would say so.

    Let us know when your intellect arrives back from vacation.

  58. jest

    @Anonymous 7:35

    "Anonymous Jones: Just tell us we are un-American. Complaining about status quo and leadership in a forum is about as civil as you can get. If we had a popular president and Congress then we would say so."

    1. This "Un-American" name calling has to stop. It started as an ad hominem attack from the right that does nothing but squelch debate. The tinges of McCarthyism in these statements are appalling.

    2. There is plenty of complaining re: Obama's race (implicit or otherwise), not just the status quo or leadership. And despite what everyone thinks of his policies or results, we have seen FAR more leadership from Obama in the last 7 months than Bush showed in *years* regarding the crisis.

    3. The debates in this country are quickly getting less and less civil. People bringing guns to political events is NOT civil.

    I'm w/Anonymous Jones 100%. I too miss the days when the comment section was more sophisticated.

  59. Siggy

    I did not vote for Mr. Obama, nonetheless, he is my President. I want him to succeed in that his succuss may well contribute to my success.

    I am indifferent as to whether he is Black or of Mixed Race. It does bother me that he is given to remarks that I find devisive and which I consider to be inflamatory towards class warfare. I do believe that Universal HealthCare is a desirable goal for the United States.

    I did not approve of his promises and I do not approve of those things he could have but did not do. I do not approve of most of what this administration has put forward as being worthy goals. Come the next Presidential election it will be very difficult for me to vote for Mr. Obama. On the other hand I may be presented with a Republican who I consider unworthy of the Office of President. In that instance I will look to the Liberterian or Independents and vote against Mr Obama, presuming that he does indeed run for relection.

    As to the economy, I beleive that it is far too early to be looking for a recovery. In fact I believe that there is an increasing probability that we will see one hellacious sell off on Wall Street in the near future.

    I think that the post itself was very good and in many helpful for the individual who is looking to sort things out find ways to preserve purchasing power.

    For all of the comments here, forget the spin and pr, what are they doing and is it doing any good.

  60. Anonymous Jones

    Anon@7:34. I don't usually like to be redundant, but what is "patently obvious" to someone is not necessarily patently obvious to me or to anyone else. I don't want you to think I disagree with most of your comment (because I agree with all your points about ignorance and limitations), but FWIW, not only is your last assertion not patently obvious to me, I completely disagree with it (but that's just my opinion). While you are undoubtedly correct that one's education or intellect does not preclude "one from being a clown, an amateur or a disaster," the stigma of being a "clown" seems to be lacking if the label can be applied in such a manner that it basically encompasses everyone or nearly everyone. The word loses meaning if it does not distinguish. I don't know why this point wasn't obvious from my initial post (that if he is clown, then we all are), but that is probably just because we have different perspectives. There surely must be a way to make cogent arguments without attacking in such an undisciplined manner. As I would use the term, a "clown" would have to show a pattern of buffoonery. If there is evidence of such a pattern within Obama's oeuvre, please show it to me. I will give you amateur, even though I would bet that he already has more experience and knowledge than most politicians and most of those posting in this forum (just a guess, and yes, that does not necessarily preclude him from being an amateur). As for disaster, as I would understand that term, I would expect to see evidence of a series of failures in which alternate courses of action would have clearly avoided such failures. Again, at this point, less than a year in, I don't see that (although, as I mentioned in the first post, I definitely do not agree with most of his policies; I just don't see how labeling him a clown or a disaster makes my advocacy of different policies more effective).

    Anon@7:35. I'm not even sure where to begin. I never asserted the complaints were not civil. I can't even imagine where that idea came from. I merely suggested that the efficacy of the complaints was likely diminished when certain unjustified labels were used. It has nothing to do with being civil. And why would I call you un-American? I did not do so, I did not even imply it, and frankly, I have no idea whether you or anyone else in this forum live (or were born) in the US. I don't even know what the definition of "un-American" would encompass. Just a bizarre attack. Thanks for proving my point, I guess.

  61. Bob Falfa

    After reading Sloan's article on Forbes ( http://money.cnn.com/2009/07/29/news/economy/fixing_social_security.fortune/index.htm ), particularly the portion about Medicare, it's clear we are in for a situation where the politicians dig another gigantic hole for someone else to deal with. Any bill that is set to take effect after the next election should automatically be null and void. This quote from an MSN article explains an awful lot about our capital and its workings:

    The scientists found traces of cocaine in 95 percent of the banknotes analyzed from Washington, D.C., alone.

  62. skippy

    Yves,

    I'm still of the mind that there are only two types of accounting, accurate or fraudulent. The powers that be over the last 40 years have eaten away the very foundation of commerce, the simple mathematics employed in determining a business bottom line. Now from the onset this disinformation distorts the the hole investment/market game, it corrupts the process from inception, and if this observation is true then is not all data skewed/false.

    In summary, until we demand factual reporting we will suffer from distorted reality?

    For those debating race, goggle Adam gene project and the doc blue eyes brown eyes by Jane Elliot.

    http://www.janeelliott.com/

    This person has more backbone than some of the most hardened bad guys I've ever met.

    Skippy…Todays market reaction, to me, seems like a US soldiers DMZ Korea down range day pass beautification mission: Haircut with accompanying Hand-job in the same chair. Then back across the freedom bridge and to the surreal reality that is the DMZ.

  63. Anonymous

    Anonymous said: "Wow, just wow.
    While I would be the last one to defend Obama, the way that the GOP is completely ignored in many of the tirades here is nothing short of stunning… Obama isn't gutsy, that's a given, but even if he was, only a fool would think that he could get much done with the culture of corporate corruptio n with which he's splattered every day.
    Oh, and the sick obsession with whether the economy is (finally!!) about to topple is disgusting. I've been hearing this for nearly 9 months now, and I'm tired of this twisted, almost perverse fascination with calamity. Go ahead, keep hoping for the big fall, but when it doesn't come this time either, consider getting some therapy, or some meds, or both."

    The first point is nonsense. He had a CHOICE for a treasury secretary. He could have chosen an outside reformer, instead he chose a tax-cheating insider. For that he deserves all the tirades so far.

    As to the second point… things haven't toppled becuase the govt. has gone on a crazy debt binge in an attempt to paper over the structural defects in the economy by pushing demand forward (yet again) utilizing borrowed funds. That not only delays the inevitable, but makes it so when it does come (and it will come, because mathematically it has to) it will be much worse had things been taken care of earlier. And while it may not be a disatarous crash, it could also be essentially a decades-long recesseion a la Japan but with a lot more debt in the system. In any case, either option not a pleasant one.

    I have seen nothing in BO's _ACTIONS_ to suggest that he possesses the Rooseveltian abilities to make the tough choices that should be within his capabilities despite the existance of the Banking junta.

  64. Anonymous

    What a load of garbage. Unfortunately, this is par for the course these days.

    Sweden, Japan, Hoover, Roosevelts Teddy and Franklin D. All and more have been applied to the unprecedented situation we face now. To me, it signals an overactive use of imagination by those who lack imagination.

    It is almost universal in the financial blogosphere that the bank bailouts were a bad idea. They were. But what else was feasible? So prominent are the "alternatives." Nationalization, allowing the banks to fail, more tax cuts, yada, yada. There are many names for this era, but one I haven't seen mentioned is "Armchair Governing." The constant "They should do this" "They shouldn't have done that" from people who will NEVER have to make the big decision at the crucial moment. People who use everything they have seen to criticize the methods of dealing with something we have never seen.

    The people who think Obama should have let the banks fail are the worst example of this. They talk as if they would have applauded our President for making the tough choice as the country fell into the subsequent abyss. Not likely.

    Those of us who know what is happening know we're in for a very rough time. But this petty "review" of the President's leadership skills is useless fodder for people who want to see him fail no matter the consequences. "Health care fiasco?"
    I wonder how an effort to address a relentless and growing burden on Americans became a "fiasco?" It didn't have anything to do with the shrill cries of those who want it to fail for political reasons, did it? Of course not. It's just an ineffective leader, "short on resolve" who decided to take on the most daunting collection of crises this country has ever seen. Silly guy, doesn't he know that he could have made a difference by sitting in front of his computer and nit-picking using untested theories?

    "Nice talk?" Read his inauguration speech again. His first speech as President was ominous and foreboding, no happy stuff there. I'm sure people think that having faith in the President is naive, but I think underestimating him is.

    By the way, IMHO Geithner was chosen, primarily, to deal with China in the coming years.

    http://www.nytimes.com/2009/05/17/magazine/17china-t.html?_r=1&pagewanted=all

    I think the President was thinking beyond 2009. Or maybe… he chose Geithner not knowing that he had a relationship with the banking industry and is now a "hostage" to his policies. What is more plausible?

  65. AP

    'I think the President was thinking beyond 2009. Or maybe… he chose Geithner not knowing that he had a relationship with the banking industry and is now a "hostage" to his policies. What is more plausible?'

    never a more niave statement rendered on this blog's comment board. or maybe i missed one that topped this one.

  66. K Ackermann

    This post really saddens me. You are exactly correct, Yves. You have been nothing but fair in your assessments of Obama, so to see it spelled out is sad.

    Some of the comments here are outrageous. Obama was "chosen" by "men" who might have seen this crisis coming and wanted at black man to take the fall. Honest to God, that's right up there with Birther reasoning.

    I think maybe a new word is in order: birthetic – someone who is extremely pathetic, and who likely causes problems that other people have to deal with.

  67. LeeAnne

    Yves, I've read your comment over a few times. If I understand your explanation correctly, Harrison's and your assumption is that readers are so afflicted with race preoccupations they cannot be relied upon to 'get' a comparison of Obama's policies to those of a former white president from the right; that we are stuck with left and far left, and the 'socialist' attack is logical based on race. So black as an adjective was necessary -ad hominem, but necessary for the writer to be understood.

    Those of us following recent political economics are fully aware that everything possible to put the next administration on the spot was intentionally put in place by the previous administration before Obama's inauguration. Once attempts by the Bush administration/Paulson failed to postpone the inevitable financial collapse until after the election, other tactics were successfully utilized. Fertile imaginations were all that were necessary to shift tactics since rule-of-law had already been tested repeatedly and found impotent, and congress was bought and paid for.

    There is absolutely no substance; not prejudice, not race, to the 'socialist' tag used to attack the Obama administration; the corporatist right use whatever works to mobilize the crazies, the MSM, and the cameras. Their linguistic specialists, think tank purchase, and media outlets have been busy at work with this tactic for decades and continue to be very effective -as witness recent circus with absolutely no substance.

    My comment that all Obama needs to do is support Medicare for all stems from that understanding -the power of corporatist's twisted linguistics. If the Obama administration had intentionally fed 1,000 pages of anti-health care reform for ammunition to the opposition to sabotage its own program, it could not have done a more thorough job.

    Therefore, a solution lies in undercutting the programs now on the table, and starting anew with a bill that would extend Medicare to all who want it -and let freedom ring.

  68. Anonymous

    @10:19

    "I think the President was thinking beyond 2009. Or maybe… he chose Geithner not knowing that he had a relationship with the banking industry and is now a "hostage" to his policies. What is more plausible?"

    More plausible is that he was told to hire Geithner by the people who tell Geithner what to do.

    Lollypops and sunshine.

  69. Anonymous

    I (The Great Econocarnac) have seen the future:

    Bad: Housing prices, as well as all types of financial data, will no longer be tracked. For we will be living in government assigned housing, comrades.

    Good: Geithner and Bernanke dancing at the end of a rope.

  70. Anonymous

    Like legions of commenters, I too have an opinion. However this time I don't have to articulate it for one of the previous posts did it for me.

    ———————–
    August 17, 2009 11:29 AM
    Anonymous SocialismSucks said…

    The die was cast when Obama nominated Geithner in early December. That single action meant that the whole ballgame was going to be a giant fix. Obama is indeed a frontman for the Oligarchy…like the rest of our recent presidents. Apparently a candidate can't get near the Oval Office unless he makes his deal with the Oligarchy first. Isn't that nice?

    And, no, this doesn't mean that the problem is capitalism. The problem is corruption.

    ——————–

    Right on SocialismSucks.
    You NAILED it.

    Obama appointing tax cheat/Goldman patsy Timmy
    was Obama crossing the Rubicon.

    At that point I smelled a rat.

  71. Borneo Gleich

    To call Obama a clown is to do a disservice to clowns. Rather you should call Obama an child of racialist preferences and special handling. A man with a powerful baritone voice, who must read a teleprompter in order to know what it is he is to say. A man whose two autobiographies were written by other writers, a man who never did an honest day's work in his life, who depends upon an army of ACORN thugs and Oprah-fied mind-zombies, and who assumes that a smile and glib comment are good enough to take him the rest of the way.

  72. LeeAnne

    you mean you didn't smell a rat when Treasury Secretary Hank Paulson under the George W. Bush administration in 2008, formerly CEO of Goldman Sachs, begged on bended knee from Nancy Pelosi for the benefit of the cameras for $700,000,000,000 (that's $700 billion) of the taxpayer money left that Wall Street hadn't already squandered, no questions asked, and got it?

  73. Hugh

    "By the way, IMHO Geithner was chosen, primarily, to deal with China in the coming years."

    Riotously funny. Like Geithner has any credibility with the Chinese after his role in the Asian banking crisis in the 90s.

  74. viking

    Anyone who makes a partisan comment these days is an idiot. Goldman and the bankers own both parties. If you are getting caught up in Dem/Rep arguments you are missing the point, that the banksters are looting everybody, while the public squabbles about left/right.

    Obama and Bush have nearly identical fiscal policies–both essentially Keynesian, both in thrall to the banking lobby, both doomed to fail.

    I voted for Obama, but he is a monstrous disappointment on financial reform. Every bit as bought and captured as Bush.

    Everyone that sees things in terms of parties is blind.

  75. Slug

    Anon said:

    "What many see as a sell-out, I see [Obama] as a man held hostage by the reality that the government is still owned by the banks and corporations. The Senate still has a pro-banking, pro-corporate majority, party affiliations be damned. And the so-called librul media has parroted every damned lie these bastards have uttered, and glossed over every substantive word Obama has spoken as if he was the one talking lies and bullshit, and not his corporatist opponents."

    A man held hostage you say?

    http://www.opensecrets.org/pres08/contrib.php?cycle=2008&cid=N00009638

    Goldman Sachs $994,795
    Citigroup Inc $701,290
    JPMorgan Chase & Co $695,132
    UBS AG $543,219
    Morgan Stanley $514,881

    I guess this 3.5 billion of reverse ransom, then?

    In all seriousness, Obama is as compromised as the bulk of the house and senate. This should not be a great surprise, nor should it be controversial.

  76. Anonymous

    It's very frustrating when the new sock puppet is in place and you find out all they did was turn the old sock inside out. Then you look to checks and balances in the Houses and with the Justice department and there isn't any as the banks run amok with taxpayer money.
    Very frustrating.

  77. arnulf

    It is no secret how this works. Barrack Obama called it "pinstripe patronage" back in 1999. Qouted from this new yorker article:

    http://www.newyorker.com/reporting/2008/07/21/080721fa_fact_lizza?currentPage=all

    E. J. Dionne, Jr., of the Washington Post, wrote about this transition in a 1999 column after Daley was reëlected. Dionne wrote about a young Barack Obama, who artfully explained how the new pinstripe patronage worked: a politician rewards the law firms, developers, and brokerage houses with contracts, and in return they pay for the new ad campaigns necessary for reëlection. “They do well, and you get a $5 million to $10 million war chest,” Obama told Dionne. It was a classic Obamaism: superficially critical of some unseemly aspect of the political process without necessarily forswearing the practice itself. Obama was learning that one of the greatest skills a politician can possess is candor about the dirty work it takes to get and stay elected.

    Anyway, you get the idea.

  78. Anonymous

    @AP 10:22 PM, 11:11, Hugh 1:02 AM

    "In the five months since Barack Obama introduced him as the next Treasury secretary, Geithner has already run through what seems to be a career’s worth of images: the brilliant technocrat whose appointment caused stocks to soar; the neophyte public figure who flopped in his debut; the regulator who has grown too close to Wall Street; the Obama adviser with the same unflappable nature as his boss. One image that hasn’t yet attached itself to him, however, is his original professional image. By training, Tim Geithner is a China hand. And though the immediate financial crisis is likely to dominate his tenure at Treasury, the economic relationship between the United States and China may ultimately prove just as important. It could be crucial to preventing the next crisis."

    So Leonhardt and myself are NAIVE (A before I, AP)? The Times isn't on the mark all of the time, no one is. But it's certainly more accurate than the tin foil hat crowd. I like to call you "crisis parasites," as long as things are bad your nonsense is somewhat plausible. Ok, you can go back to pining for our subjugation by an oligarchy.

  79. DayOwl

    Perhaps it is time to realize that presidents have little actual power. When congress is full of bought-off clowns, how much can really be accomplished by a president alone?

  80. Hugh

    "Obama and Bush have nearly identical fiscal policies–both essentially Keynesian, both in thrall to the banking lobby, both doomed to fail."

    The Obama and Bush policies are many things but Keynesian is not one of them. Keynes was about stimulating aggregate demand. Nothing either Administration has done, except for a relatively small part of Obama's stimulus package falls into this category.

  81. billy-bob

    Congress is full of walking, breathing sacks of crap.

    Obama is a punk to the oligarchs.

    Bought and paid for each and every one.

  82. Fachtna

    Sigh. The president appoints the heads of all the administrative agencies, and those appointments must be confirmed by the Senate.

    The Secretary of the Treasury serves at the pleasure of the President; i.e., President Obama could fire Geithner any time he wants, for no reason whatsoever.

    "The Secretary of the Treasury is the principal economic advisor to the President and plays a critical role in policy-making by bringing an economic and government financial policy perspective to issues facing the government. The Secretary is responsible for formulating and recommending domestic and international financial, economic, and tax policy, participating in the formulation of broad fiscal policies that have general significance for the economy, and managing the public debt. The Secretary oversees the activities of the Department in carrying out its major law enforcement responsibilities; in serving as the financial agent for the United States Government; and in manufacturing coins and currency." (from the Treasury website)

    Got that? The Treasury is the one that's supposed to be bringing the lawsuits. The Treasury was responsible for watching the CDS before the economy blew up. Geithner, as the head of the NY Fed, was dude numero uno reporting to the Treasury re CDS.

    The President sets the agenda. I have to agree with the other commenters about Geithner – when he was appointed by President Obama, the president made his agenda loud and clear.

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