Barofsky v. Geithner and Administration Mouthpieces (Yglesias Edition)

Neil Barofsky continues to take issue with the Administration’s efforts to depict itself as the friend of ordinary Americans when its real loyalties are to banks. In a Reuters op-ed, he took on the hypocrisy of the Administration and its allies in their “fire DeMarco” messaging. If you are late to this row, Ed DeMarco, head of Fannie’s and Freddie’s regulator, the FHFA, nixed the idea of having his wards make principal reductions on mortgages, despite the fact that top mortgage industry analyst Laurie Goodman has ascertained they are far more successful than mods that don’t lower principal balances.

As various commentators, including yours truly, have pointed out, the criticism of DeMarco is sheer scapegoating. DeMarco serves as a convenient bad guy for an Administration that has been utterly indifferent to the fact that many foreclosures are unnecessary and economically destructive (and that’s before you get to the fact that the Administration could have installed a permanent head for the FHFA when the Dems had 60 seats in the Senate).

Barofsky’s piece describes in some detail how Geithner stymied principal modifications, using exactly the same arguments that DeMarco is making now. The bottom line:

The truth is that the administration – whether through principal reduction or otherwise – has never prioritized coming up with an effective approach to helping homeowners and reviving the housing market, even when it had a multi-hundred-billion-dollar TARP war chest at its disposal.

Barofsky’s most damning evidence, and he recounts this long-form in his must-read book Bailout, is that the Administration never cared if the mortgage modification program HAMP worked, if you think that “worked” means “saved homeowners from foreclosure.” Geithner said it was simply to help spread out foreclosures out over time, or “foam the runway”. I’m left with the image of a bank as an overloaded B52 with smoke coming out of one engine and its landing gear refusing to lower landing belly flat on a runway “foamed” with homeowners lying down, side by side, and crushed into bloody pulp as the aircraft hits the ground. That is, after all, pretty much what happened.

Barofsky’s rebuttal of the Administration and its defenders on principal modifications is a small set piece in what has been an ongoing effort to misrepresent Geithner’s (and therefore the Administration’s) abject refusal to take serious action against banks even though they represent a clear and present danger to the rest of the population. The publication of Barofsky’s book has flushed out some of the hard core loyalists, one of them the New York Times’ Jackie Calmes. And the continuation of Barofsky’s lonely efforts to correct the record gives me the opportunity to turn to a piece by Matt Yglesias, “Neil Barofsky vs Tim Geithner: Who’s Right on the Bailouts?” I had wanted to address when it was released in late July.

I’ve dragged my feet on addressing it, precisely because it manages to achieve a remarkable density of misdirection, obfuscation, straw manning and misrepresentation in a mere 745 words. I don’t read Yglesias much because he has gotten the art of propagandizing down so well that it probably comes from him as second nature, just as an author of bodice-rippers knows what story lines, scenes, and turns of phrase will evoke the desired Pavlovian responses in the target audience. So I thought it would be worthwhile to parse this piece not just because it was worth debunking, but also an an exercise in identifying some of his devices.

Yglesias tries to create the impression that critique by Neil Barofsky about the Bush/Obama policies towards the TARP and banking generally is really a personal spat between Barofsky and Geithner, and when you put the pique aside, they really aren’t that far apart. Yglesias tries to minimize the significance of the Barofsky’s observations: it’s a “narrow disagreement,” “not….consequential.” Oh, and it’s really about a “fairly wonky policy disagreement” so if you don’t buy what Yglesias is selling, that’s because it is over your head.

So what is the contretemps about, per Yglesias? It is supposedly about what Treasury is “trying” to do. Notice how even though this piece is supposedly about Barofsky’s particular criticisms of how the Bush and Obama administrations ran the TARP, as set forth in his book, Yglesias ignores the obvious starting point (perhaps because he has not read Barofsky’s book; there’s a complete lack of the sort of specific references you’d expect otherwise). He treats the Administration as protagonist. By implication, Barofsky (in the setup of the piece) has to respond to THEIR position, when in fact the onus is on the Administration and its allies to rebut Barofsky’s charges. From the article:

It’s useful to start with what the Treasury Department says they’ve been doing regarding the financial system since they took office. What they’d tell you is that they’ve been doing two things. One is trying to create the kind of healthy well-capitalized banking system that’s crucial for broader macroeconomic health. The second is trying to create the kind of well-regulated banking system that’s less likely to blow up in the future.

Ooof. Notice, as I indicated above, the repeated use of the word “trying”. “Trying” is an excuse word, or a statement of unrealized intent: “I’m trying to lose weight.” For the Treasury’s loyal backers to characterize their efforts, four years past the crisis, as “trying” to achieve is unwittingly damning.

But even that reading treats Treasury as being honest, which it isn’t. Oh yes, creating a well capitalized banking system is somewhere on the list of what it wants to achieve, just like the person who is “trying” to lose weight does want to lose weight, but lacks the discipline or time to exercise and prepare healthier meals. But Treasury has a prime directive, which is preserving the status quo, and moving toward what it is “trying” to achieve would be disruptive to the incumbents. If the Treasury were serious about having banks be well capitalized, it would be seeking to reach much higher capital levels than it has targeted. And in pursuit of that, it would not have allowed banks to pay back the TARP so quickly. This turned out to be an unexpected point of leverage. TARP had weak (stress very weak) restrictions on executive pay, but even so, the recipients were eager to get out from under them. Keeping the banks in TARP until they hit much higher capital levels would have put fire under the feet of the otherwise uncooperative executives (and yes, we would have had to listen to Jamie Dimon and John Stumpf carry on about how unfair it was because they really didn’t need the money, no, no, it was forced on them). It no doubt would have led the top brass to do something they heretofore insisted was impossible: cutting the pay of the producer level. That sort of thing is in fact very doable if industry-wide conditions force it (and if you don’t believe me, a former Goldman co-chairman is of the same view).

Oh, and let us not forget that, having failed to get tough with the banks to raise capital levels, the “trying to create a well capitalized banking system” is an excuse for ripping off taxpayers to achieve that end, such as the failure of Geithner when he was at the NY Fed to negotiate down the payouts on AIG’s credit default swaps. Although he’d never dare say it publicly, I have no doubt he would have regarded the idea as nonsensical if anyone has presented it to him. Of COURSE the point was to pass more dough to the banks. This was clearly a feature, not a bug.

As far as “trying” to achieve a “well regulated banking system,” let’s see how the record stands. Treasury did nothing in the face of widespread mortgage abuses. Yes, these took place in servicing units, which Treasury does not regulate directly, but a Treasury chief has a powerful bully pulpit were he to use it. In addition, as we have pointed out, there were blatant abuses of REMIC, the part of the 1986 Tax Reform Act that sets forth the rules for mortgage investment conduits to be treated as pass throughs. The IRS sits in Treasury. Admittedly, the tax hit for REMIC abuses would fall on investors, but it would be so large that it would unleash a litigation shitstorm against the banks. So the Treasury had plenty of leverage to make the banks obey existing law but it chose not to use it. Similarly, Geithner kicked the Libor problem over to London, when US banks were also implicated in price manipulation, which is a criminal anti-trust violation. Oh, and what about the scandal du jour, Standard Chartered? Treasury is supposed to take the lead in investigating violations of sanctions against Iran, and it appeared happy to investigate rather than enforce. And remember the posture of both the Paulson and Geithner Treasuries on TARP fraud: the banks would never never risk their reputations by doing such a thing! Barofsky’s demands would scare them away from using TARP and were just prosecutorial paranoia.

After this set-up, he then tries to prove that Barofsky doesn’t have an answer to these claims by Treasury. And rather than deal honestly with the book, which presents considerable counter-evidence (start with its utter lack of interest in pursuing HAMP abuses, like misleading advertising and violations of consumer protection laws), he instead cites an interview with Ezra Klein. And what has Klein asked about? The favorite Pavlovian device for scaring all good liberals into giving the Administration a free pass: talk about what Romney might do. This is the extract:

“Romney is offering them a better deal potentially from their perspective than Obama is,” [Barofsky] said. “They hate anything that could possibly eat into their profits and their ability to exploit their size and power. And Mitt Romney is offering the repeal of Dodd-Frank.”

“So Dodd-Frank was actually very helpful in preserving the status quo for the banks,” Barofsky continued. “But better to have nothing. Better to go back to the go-go days of 2006 and 2007 when they could print money on the backs of American homeowners.”

Now notice the sneaky trick Yglesias played. He introduced this bit by claiming:

He agrees, for example, that Team Tim is in fact trying to better regulate the banking system and that it’s being fought in this effort by the Republican Party:

But that is not what Barofsky said. Yglesias claims to be about to deliver proof that Barofsky and Geithner are on the same page, when the quote demonstrates the reverse. Barofsky stated explicitly that Dodd Frank preserves the status quo, one that he clearly sees as not being within hailing distance of “well regulated”. The fact that the Republicans want something worse is irrelevant to the question of whether Barofsky, or for that matter, anyone not in politics or banking, sees what Geithner has done as adequate.

In the next bit, we get to see how it serves Yglesias to organize his article around what Treasury wants the chump public to believe about its activities. He then take another Barofsky quote from the interview to get to the “healthy and well capitalized” claim. (Oh, and another propaganda trick is evident throughout the piece: count how many times Yglesias put the words “Treasury” and “healthy” and “well capitalized” in the same sentence in the piece. The more you put words in close proximity, the more you create the impression they are connected. That was documented in the efforts to sell the public on the idea that Bin Laden was an ally of Saddam Hussein. The efforts to debunk the connection actually reinforced it in the minds of much of the public, simply by putting the two names in the same sentence.). While Yglesias contends Barofsky only “sort of” agrees, he then tries to argue that both sides have differing views and it is hard to say who is right:

This gets us to the actual dispute. Team Tim would say that they’re trying to create a well-capitalized banking system in order to bolster the broader economy. Team Neil counters that the broader economy would be better served by a policy that imposed steep losses on banks and instead repaired household balance sheets. Beneath all the anger and accusations and counter-accusations is a fairly wonky policy disagreement about the relative importance of household balance sheets versus the credit channel to laying the preconditions for growth.

So who’s right? I think this is actually a much more difficult question than partisans on either side are willing to acknowledge.

This has taken us so far away from the core argument of Barofsky’s book (and hence the core of the dispute) that is it tantamount to straw manning. Barofsky’s point is that both the Bush and Obama administrations, Obama’s worse that Bush’s, were captured by the banks. Barofsky’s job was about preventing fraud, making sure the funds were accounted for, since Congress made it explicit that the rationale for passing TARP was so that banks would lend to the economy. And even though funds are to a fair bit fungible, both accountants and the banks themselves indicated they could say how they used TARP funds (hell, many volunteered the information to reporters).

Yglesias also singles out Barofsky’s mention of homeowners, when he actually said, “this administration and the prior administration—there’s no meaningful difference between the two—consistently chose the interests of Wall Street banks over that of homeowners, over that of the broader economy.” This is not “homeowners versus banks” but “banks versus the real economy” and even more important, as he stresses in his book, “banks versus the rule of law.”

We get this disingenuous bit:

Team Neil has never really presented a coherent alternative course of action that takes real account of the consequences of imposing very large losses on the banks. From the original winter 2008-09 argument over bank nationalization along Swedish lines, I’ve rarely heard it acknowledged that these courses of actions would likely have required hundreds of billions of dollars in additional “bailout” money. I think that still would have been the optimal policy, but it’s not a no-brainer and I think the administration’s left-wing critics would have been very disappointed if the White House made universal health care take a back seat to a second round of bank equity injections.

Huh? First, Barofsky does not need to go there. His argument has been much simpler: Congress gave TARP funds with the express understanding that banks would lend more. They didn’t do that. Oh, but they did decide to pay themselves record bonuses in 2009 and 2010.

But Yglesias is also dishonest in his characterize the position of people who have argued for other alternatives to coddling the bank, starting with yours truly. Sorry, Mattie, I’m no fan of the ACA, but even if I were, you present a false choice. Plenty of folks, starting with Nouriel Roubini in 2007, pointed out the far more obvious way to clean up bank balance sheets: wipe out stockholders and cram down bondholders, and have bigger fiscal stimulus to offset the deflationary impact. It’s another Administration policy “bank bondholders shall take no losses,” and refusal to use the power that Obama had at the start of his first term for real change that has stood in the way.

Yglesias also patted himself on the back in the last paragraph by calling himself a “monetary policy guy” which elicited snorts from economists I know. But that’s in keeping with his closing argument that if only the Fed were more aggressive, we could get the economy on track. If he were a real monetary policy guy, as opposed to a water carrier for the Democrats, he’d know the loanable funds theory is bunk.

It’s actually a backhanded compliment to Barofsky that Yglesias had to go so far afield to try to minimize his book and then did so not in a frontal attack, but a strategy of giving Treasury credit where credit is not due and pretending any disagreement is narrow. In a lot of ways, open enemies like Turbo Timmie are much easier to handle.

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  1. Middle Seaman

    The point of no return, as already stated upteem times, was the Democrats selection of a newcomer, untested, suspect and never before liberal Obama. Geithner stabbed us in the back because this is what Obama wanted until his reelection campaign has started and Obama will do after being reelected.

    I stopped reading Yglesias years ago; there was no there there. Yglesias has to make a living. Devoid of real convictions, Obama-like, he caters to the highest payer. Barfosky offers no payoff. Geithner unknowingly control the purse Yglesias feeds off.

    The average Joe doesn’t appear on the Yglesias’ and, sadly, the current Democratic party radar screen. After all, Democrats are the sane version of the crazy Republican Party. Geithner tries hard; he works for the banks which we all need to be even larger and meaner.

    Yglesias and Davidson follow the money and work for the rich. They do, however, believe in global warming and Uncle Darwin. They are sane Republicans.

    1. NotTimothyGeithner

      “Geithner tries hard”

      I disagree. From personal experience with the Democratic Party, laziness and the search for a simple or superficial solution to how to win is the defining characteristic of the Democratic Party. Geithner appears to work hard for the banks because the banks are doing the work for him. Geithner may personally sympathize with the banks, but the defining characteristic of this Administration is not loyalty to banks but laziness.

      Take Obama’s high level appointees. A crook who worked hard would have found people less repulsive and just as capable as carrying out the banks orders and protected himself from criticism at the same time. Look at the W. Administration and the propaganda around Colin Powell.

      Treasury- They just found the highest level person the banks loved and the President’s BFF.

      Ag- They just found a guy who Big Loved the most.

      Defense- They just hired a W. appointee.

      Fed- They just hired the last guy.

      I tend to believe people when they speak even liars because people reveal a great deal about themselves without even trying. The President went to a correspondent’s dinner and made jokes about killing minors with predator drones. Obviously, he used that speechwriter, but given the reaction to the drone slaughters and Bush’s WMD search in the Oval Office video, a thinking person would have cut that line or told the President, “this is not acceptable given…” No one said anything because it would require thinking about past jokes and then explaining why it wasn’t acceptable, possibly to a superior which can be hard.

      1. TK421

        I think you have something in terms of Team Obama’s laziness. Look at their complete refusal to have a plan B (no matter how poorly thought out their plan As always are). And yet no matter how many times this blows up in their faces, they refuse to change course.

        1. Lambert Strether

          That’s not laziness. It’s a desired objective. Nothing blows up in “their” faces at all. They’re still in power, right? Still got lots of money, right? “Made men” in DC for the rest of their natural born lives, right? So what’s not to like?

      2. JTFaraday

        “people reveal a great deal about themselves without even trying. The President went to a correspondent’s dinner and made jokes about killing minors with predator drones.”

        Yes, yes. But he made jokes about killing minors with predator drones because his daughters like them–and that makes all the difference!

  2. Max424

    Excellent take down (giggle).

    I would only add that those Fed chairs Matt refers to, the ones that sat vacant for a spell (back in whatever, 2009? 2010? Who cares?), where an Ygelsias obsession.

    Matt posted on it almost daily (If only the administration would act, and fill those absent chairs!), and almost daily I made some comment like, “Matt, two empty Fed chairs are about as important to the American economy as a pair of missing back-up cheerleaders are to the victory plans of the New England Patriots.”

    Note: Remember, we’re talking about MattY, a guy who coined the unforgettable term, “fraudy,” to describe the outrageously blatant criminal activities of the banksters.

    That’s right, tens of thousands of financial criminals hadn’t committed criminal fraud against tens of millions of victims, robbing them out of trillions, but instead, had engaged, and yes, admittedly, possibly might still be engaging in, just a wee bit o’ fraudy.

    Add a y to fraud, apparently, and you no longer have to do 5 to 10. And if Matt could have his way, with his negative “real” interest rates, the Fed, with or without is full compliment of chairs, would pay these wretches billions (to take free trillions!) so they could commit fraudy on ever grander scale!

    1. Max424

      I forgot this Matty (look over there!) double-speak classic:

      “I think the administrations left-wing critics would have been very disappointed if the White House made universal health care take a back seat to a second round of bank equity injections.”

      Bullshit. This left-wing critic would have been ecstatic if “universal health care” took a back seat to just about anything, especially if it included frying the motherfucking banksters over hot coals.

      “Bank equity injections?” Too funny. Exactly what Matt is, was, and always will be calling for.

      And “universal health care?” Like this left-wing critic would have been devastated if the ultra right-wing Heritage Foundation’s plan for the Big Giveaway, to Big Insurance, was what, somehow swamped by the large wake left by ongoing monetary policy?

      Giggle. The kid still makes me laugh.

      1. tom allen

        And to reiterate, the “universal health care” law is neither “universal” nor “health care”. It’s an expansion of private health *insurance* that still leaves tens of millions of people uninsured.

      2. CaitlinO

        So we got neither. Not the universal health care we were promised in the campaign but a hodge-podged bit of coverage that carefully preserves sky high insurance and pharma profits.

        And we definitely got no fried motherfuckers.

        A total loss all around.

    1. John F. Opie

      Someone takes Yglesias seriously? Seriously?

      It’s not that the wonky stuff is so much over the heads of the great unwashed masses, but rather that the ethics of the current administration is clearly over the heads of Yglesis and his ilk.

  3. Goin' South

    Yglesias is yet another example of “progressive” blogdom. He began blogging back when he was still at Harvard and the editor of the Harvard Independent, founded in the late 60s as a right-wing alternative to the Crimson. It’s long been the hangout for Propertarians and other scum.

    But Yglesias was socially liberal and a rabid atheist, so he was promoted heavily by Kos and Atrios. His rise runs parallel to Ezra Klein. Two neoliberal peas in a pod, “made men” created, in part, by the “progressive” blogosphere.

    1. tiresoup

      Ezra and Matt each have there lips planted firmly on the asses of administration shills to get the freshest crap. Then they helpfully spread the manure. It’s called access journalism.

  4. Dave

    I often wondered how there could be so much ignorance on the right back in the days of Bush and the build up to war with Iraq. Any attempt to reason with people on the right side of the political spectrum was fruitless. Now I am seeing the same dynamic from people on the left.

    Of course this is a generalization, as there are reasonable people on both sides, but it appears to me that it is a very small portion on each side. When I point out President Obama’s gross shortcomings I am met with the same ignorance as I experienced with Bush’s supporters. How dare I question President Obama, he has my vote for sure, he is doing a great job, blah blah blah. He is, at best, a small spineless politician. I refuse to waste my vote on such a man. We needed bold action, we got wet noodle.

    I will vote 3rd party again this year, I hope more will follow suit. It is the only real power we have left. Somehow we have to break the bonds of this 2 party cabal.

    1. TK421

      You’re not the only one who goes through this, if it’s any consolation.

      I would only add that, from time to time, Republican voters get sick of the crap their party feeds them and throws a few of the bums out. Democrats, on the other hand, utterly refuse to even attempt this, instead keeping on supporting the same losers who continually stab them in the back.

    2. charles leseau

      I find it hard to consider Obama supporters or knee-deep Democrats “the Left” anymore at all, though I try to be careful about the hyperbole around this. Flip around a few wedge issues, throw in some sharp educated irony and an infinite capacity to make fun of the hard Right as their only recourse to deal with it all, and they’re not really so different from their counterparts so far as I can tell – at least not the middle class professional set. I guess this is where the term “centrist” comes from. Certainly they have little desire to rock the boat very much. Too afraid of what they would lose.

      I’m always thinking of that Kurt Vonnegut quote with regard to how the American left deals with these problems:

      “During the Vietnam War, every respectable artist in this country was against the war. It was like a laser beam. We were all aimed in the same direction. The power of this weapon turns out to be that of a custard pie dropped from a stepladder six feet high.”

      On the other hand, I’m not doing much of anything either other than living my life a certain way, so there’s that, but I’m still not going to tu quoque my own argument down the trash chute.

  5. JS

    Neil Barofsky is an American hero. At a time when it is most needed, we have in Mr. Barofsky, someone from the inside, who is willing to cut through all the deceit and tell the truth about the Adminstration’s lax treatment of the banks, and disregard for America’s struggling homeowners.

    Here, I believe are two telltale signs of Geithner’s and the Administration’s real intentions:

    First, if you dig into the FDIC HAMP guidelines, you will find, on page 3, in somewhat cryptic language about cash flow, the MANDATE that struggling homeowners with substantial equity be denied a modification. These are the very homeowners who are least likely to re-default, as shown by stats from the HOLC of the 1930’s. HAMP was designed to help MBS investors. It coincidentally helped some homeowners who were not underwater, and did not have substantial equity, so the Administration falsely hyped it as a program to help homeowners.

    Second, when the banks temporarily froze foreclosures because of the robo-signing scandal, Geithner was asked about it during an interview on the Charlie Rose show. His reply was that the banks, in an effort to insure that no homeowner who could afford to sit in their home was foreclosed. The banks were caught committing massive fraud, and Geithner chose to characterize their temporary foreclosure freeze as a noble act! Furthermore, he talked of homeowners “sitting” in their homes… a nuance perhaps, but anybody who gave a damn about homeowners wouldn’t characterize homeowners as “sitting in their homes” instead of “keeping their homes” or “living in their homes”?

    Compare HAMP to the HOLC of the 1930’s and it becomes quite clear that the Administration has a good functional model to help homeowners but instead sees struggling homeowners as deadbeats that need to be “flushed out” so the housing market can stabilize. The HOLC actually sent workers out to peoples homes, knocking on their doors offering to help!

    1. Eric377

      I am delighted to read that borrowers with substantial equity were kept out of HAMP. Why in the world would the US Treasury move a molecule to rearrange a situation that clearly is functioning? A owes B money and B holds a lien on A’s property which is worth more than A owes. Neither A nor B needs any help figuring out how to move ahead.

      1. JS


        A few questions:

        1. Do you have the same opinion regarding the banks? Should the government have “moved molecules” (trillions of dollars) to bail them out or have allowed them to fail?

        2. Do you think the securitization contracts should also be honored? For example, Deutsche Bank is suing JPMC as successor in interest to WAMU for clearly and indisputably breaking the terms of their pooling and servicing contracts. JPMC filed a defense in Federal court stating that they are not successors in interest to WAMU, while at the very same time foreclosing on thousands of homeowners with WAMU-originated mortgages, as successor in interest to WAMU!

        3. Do you think the REMIC laws should be enforced, and all the taxes that should be due for REMIC violation collected from the banks and/or MBS investors?

        4. Since the banks clearly disregarded long-standing property laws, essentially making the mortgages unsecured debt rather than mortgages back by real property, should any court move a molecule to support these improper, illegal foreclosures? After all the banks screwed up… so too bad too sad, right?

        5. Should the banks be held accountable and compensate homeowners and MBS investors for luring borrowers into mortgages they could not afford, by providing grossly inflated appraisals, gutting all normal underwriting standards, providing illegal point-spread bonuses to brokers who could illegally steer borrowers to pay higher than necessary interest rates, then falsely rating these mortgage pools as triple-A (or ALT-A) so they could sell them as rock solid investments to MBS investors?

        6. Do you think MBS investors should simply lose their money for making bad investments even though the banks knowingly sold them crap, by calling it gold, even betting against the very same mortgage pools they were selling as solid investments?

        7. Do you think all Americans who are current on their mortgages, but whose home values and neighborhoods are taking a big hit because of the foreclosures should just suffer the consequences? After all they did choose to buy overvalued homes, with irresponsible neighbors and they did elect the government officials who decided to destroy all financial regulation, and even ignore the FBI’s warning in 2004 of widespread mortgage fraud that could cause a financial crisis.

        Just trying to figure if you want to hold everyone accountable for their mistakes, or just the struggling homeowners with equity.

  6. Peter Pinguid Society

    This is the same message I just posted for Adam Davidson, only here I substituted the name “Matt Yglesias”.

    There are an infinite number of these fawning servile shits with pig faces, the only difference between them is the names, so here we go again:

    Matt Yglesias is a lackey to the 0.01 percent.

    lackey (plural lackeys)

    1. A footman, a liveried male servant.
    2. A fawning, servile follower; a lickspittle

    Example of a sentence using the words fawning, servile and lickspittle:

    “In the presence of his 0.01 masters, Matt Yglesias is a fawning, servile, lickspittle.”

    In short, Matt Yglesias is doing a great job serving the bankers and the 0.01 while trying to hoodwink the 99.9 schmucks into believing he is not a fawning, servile, lickspittle of the bankers and the super rich.

    ha ha ha, just keep listening to Matt Yglesias you effing morons, then you’re certain to die stupid, ha ha ha

    We are the Peter Pinguid Society, we are the 0.01 percent.

  7. Aaron Layman

    Since the entire article by Yglesias is essentially a misstatement of facts, perhaps we should ask for a full revision or deletion.

    Not that they apparently give a damn. I’d be curious to know who’s blowing who? One would have to surmise there are some favors being exchanged when bullshit like this makes it to print.

  8. Robert Asher

    Morris Schapies, a left-wing journalist, taught journalism courses at CCNY in the 1930s. He used to talk into class with a few newspapers under his arm or stuffed into his jacket pocket. A radical student once asked him why he did not bring the Daily Worker to class. Schapies replied that one had to study the enemy to make a revolution. Put another way, the dialogue above is an exploration of what Gramsci called hegemonic process, the way institutions dominated by the political and econommic and religous elites, propagandize all classes, INCLUDING ELITES AND THE MIDDLE CLASSES, to convince them to accept the elite view of social and economic policy. That is exactly what so many colunists have tried to do to Barofsky. Why is Barofsky dangerous? Because he tells us that Geithner would not even look at him when he was reporting on the activities of the IG TARP. Doesn’t that tell us something? And of the alloted 5 minutes for reporting, Barofky was given only 30 seconds. Then he was asked to leave. Now Barofksy had this silly idea that FRAUD was wrong. What even he does not grasp is that FRAUD IS INTRINSIC to the way large businesses operate. And in the case of HAMP the mortgage compinies in the field who were deceiving people with underwater mortgages were SUBSIDIARIES of….the nation’s largest banks. Ms. Smith has it just right when she calls these criminals banksters. Like Henry VIII and other monarchs they rule, immune from the rule of law. Yes, I read Barofsky’s book…could not put it down. 90% of the reviews do not do it justice. If only he was a special prosecutor charged with looking into the criminal activities of our big banks.

  9. Brett

    I too don’t read Ygelsias. He’s a mediocre writer. Reading his work, you just can’t help thinking he’s aiming for a high profile job in a future Democratic administration (say Press Secretary, a la Jay Carney). It’s defend the administration against the most serious charges, but every now and then try to fake your independence by softball hitting them on a random policy debate of the moment. This guy is a fail, but it seems he only fails upward as he commands a big audience from the same lame brains that can watch MSNBC and not feel sick to their stomach listening to that constant hackery “Democrats are good, Republicans are bad” BS.

  10. Jill

    Barofsky is dangerous for reasons everyone shows above. One important narrative Obama is selling to get elected is this: He’s for the little guy. Obama is against the banks.

    Barofsky is very well informed. Additionally, he is quite articulate. He raises serious questions which contradict this false narrative of the Obama machine. It therefore becomes necessary to tear down Barofsky, to discredit him.

    Since people are unable to honestly challenge what he is saying, they must resort of all manner of disengeuous propagnada. Repetition from a large number of “captured” newz sources and reviewers is necessary to counteract the truth.

    I found this examination of “newzcore capture” at a link from Glenn Greenwald:

    1. Waking Up

      Everyone should read Barry Eisler’s list of general warning signs as to when you might be compromised as a “journalist”. Thought provoking and certainly needs to be discussed in greater detail. Luckily, Yves Smith isn’t afraid to expose hypocrisy.

      Thanks for the link.

  11. L. Mason

    Excellent post. You give me hope there are others not so enthralled by the puppet show that they’ll look behind the curtain.

  12. briansays

    in an early pre Pretty Woman episode Julia Roberts playing the girlfriend of a gangster confides to Crockett that she prefers to date hoods cuz they are more honest in their treachery–such is Mitt

    the only qualities i comes up with for Obama is either incompetant or corrupt–i suppose this is suppose the make him more human and likeable–the incompetant part at least

  13. petridish

    I grind my teeth when the word “trying” is used as a political action verb.

    It reminds me of something I heard long ago that demonstrates the essence of the word “trying.” Just toss a pencil onto the floor and tell someone to “try” and pick it up. Invariably they will reach down and pick it up to which you reply, “I didn’t tell you to pick it up, I told you to ‘try’ and pick it up.”

    Trying is the opposite of doing.

    1. Bill the Psychologist

      The self help groups like Alcoholics Anonymous encounter many people who are “trying” to stop drinking, drugging, etc.

      They have many helpful sayings, to remind people whose brains are clouded by various substances of reality including: Trying is Lying.

      Think about this the next time you hear anyone, but particularly a politician say “we’re trying…….” It’s a good reminder of what is real.

  14. A.B.

    Thanks for the (as always) clear sorting through of the claims and stances at hand. As an aside, though, maybe consider using different analogies to explain the weakness of “trying” statements than weight loss, since weight loss through diet/exercise far and away doesn’t work:

    1. Yves Smith Post author

      No, I don’t agree. This is an apology for the American diet (full of sugar and corn and fats).

      In fact, it makes a statement that is untrue: “But no one goes from actually fat to actually thin and stays thin permanently.” I was fat from one year old (30 lbs when I had been an under 7 lb newborn) to my mid teens. And I mean seriously fat, my BMI was on the borderline of obesity. I went on my first diet at the age of 12 (my initiative) and over the next few years got off the weight and have kept it off my entire adult life. You have to be willing to eat less on an ongoing basis. Most people regard diets as temporary and are not willing to change behavior on a permanent basis.

      1. A.B.

        So I always agreed with the last two sentences of your reply, and am not sure how much I’d agree with my original statement since reading a few pages about the changes in the American diet in the last few decades, but I think the main point of what I posted is that significant permanent weight loss requires drastic and permanent lifestyle changes (like you did) – such that many people who make significant lifestyle changes and lose the 10-15 amount instead of the 30, 40, or 50+ they had hoped for are seen as “not having tried”. I would be interested to see what this looks like in countries that haven’t been weaned on high-fructose corn syrup and similar products, though. Thanks for responding.

    1. Mattie again

      Mea culpa, MIT. The “study” mentioned above is the one by Emory/Rutgers/U Washington recently discussed by Alison Frankel at

      Also – This notion of “wonk policy” debate should not escape scrutiny…

      Have you noticed that in DC, anything labled as such easily gains access to otherwise intelligent conversation?

      I have learned to be leary of the W word. In my experience, it usually describes “debate” that seems devised to flatter those it seeks to engage in circular and unproductive discussion. In short, another stall tactic.

      We are out of time on this issue. None of us fall for this again.

  15. Mattie

    Mattie, not MattY speaking…

    Thank you Yves for calling the Y piece out for what it is – a deliberately crafted subject-changer. The subject is Barofky’s monumentally important book, which explains the consequences of regulatory capture in the TARP context. What it also does, should we continue failing to address the festering malignacy which feeds that capture – is to memorialize that ‘moment’ when when Americans surrendered to the corruption of everything we have held as uniquely, honorably American. It will serve as a snapshot of the ‘moment’ we stopped trusting government and became a nation of cynics.

    We know the Y tactic is serious and well-timed to coordinate with other defenses [recent MIT, et al “study” poo-poo-ing negative impact of revolving door at the SEC]. We also know it effectively squelched serious discussion of the book over at CreditSlips. [See AL’s brief Teams Tim v Neil piece at the end of July.] Hopefull, the CS team will take a second look at these issues.

  16. fresno dan

    3 or 4 years ago I would have thought Yglesias may have a point. But years have gone by, and those amenable to reality can see that the policy of rewarding (by not prosecuting) financial fraudsters hinders eonomic recovery.

  17. Hugh

    My memory is that before HAMP, there was HASP and HARP. And along with HAMP, there was also a first time buyers credit. Remember that one? These were all joke programs whose ostensible purpose was to help homeowners but whose real purpose was to 1) support housing prices or rather the fiction of housing prices thereby masking the underlying insolvency of the banks and 2) placate the rubes without actually doing anything (or not very much) for them. Masking the insolvency of the banks long enough for them to gamble and gouge their way back to solvency is and has always been the Obama-Geithner plan. Helping homeowners in the only meaningful way they could be helped, via cramdowns/principal reductions, has always been viewed as lethal to this plan since it would expose the very insolvency Geithner and Obama have done so much to hide.

    As for Yglesias, he is an example of a phenomenon fairly common in the progressive blogosphere. There were many there who did good, even great, reporting on the scandals and excesses of the Bush years who then hung up their honesty and critical thinking at the door once the Democrats were in office. In effect, they showed themselves to be the very partisan shills and hacks they accused conservatives of being when Republicans were in power.

    1. Greg T

      You nailed it, Hugh. Matty Y has chosen to run interference for the O Administration, and by extension, the banks. While it’s demonstrably true that the bailout policies have failed the general population: unemployment remains stubbornly high, foreclosures continue unabated and the housing market is an incorrigible mess, the administration has made no attempt to reverse field. This means they’re either breathtakingly incompetent, or they don’t care much for the general population.

      Most of us here know which one it is.

    2. Waking Up

      Secretary of the Treasury Timothy Geithner and President Obama are morally bankrupt. At this point, I pity, and certainly do not give credibility, to people who fail to acknowledge the abuses of the Obama administration. If you make EXCUSES for endless drone attacks on citizens in the Middle East, for taking away the civil liberties of American citizens through the Patriot Act, for a President having a “kill list”, for so-called “health care reform” which mandates that every citizen purchase private insurance further strenthening their ability to abuse people in the future, or the complete lack of holding the banking industry accountable at the top levels for abuse, just to name a few, then perhaps it is time to determine at what moral point you will say STOP…enough.

      P.S. Hugh, thanks for your contributions as always.

  18. ep3

    yves if i may interject an interpretation:
    “This gets us to the actual dispute. Team Tim would say that they’re trying to create a well-capitalized banking system in order to bolster the broader economy. Team Neil counters that the broader economy would be better served by a policy that imposed steep losses on banks and instead repaired household balance sheets. Beneath all the anger and accusations and counter-accusations is a fairly wonky policy disagreement about the relative importance of household balance sheets versus the credit channel to laying the preconditions for growth. So who’s right? I think this is actually a much more difficult question than partisans on either side are willing to acknowledge.”

    Now maybe you just chose to parse the economics of this writing. But notice how the author starts with a positive comment, using the administration. classic opinionated writing. “team tim…well-capitalized…bolster the broader economy”. very happy comment.
    then the next sentence turns to the sad/negative comment. “team neil…steep losses….repair household balance sheets”. negative comment.
    So after presenting “both sides”, the author turns to say how after all this fighting, that really this is a bureaucratic argument with a lot of big words not worth mentioning here and that aren’t important. And really it’s just a political fight between two politicians over whether repairing household balance sheets (BAD!) or repairing credit channels (yes, that’s all that needs fixing are credit channels) that are the preconditions for growth (GROWTH IS GOOD!).
    And now it’s time to drive home his point. First, no one is to blame, then no one knows the answer to fix the unknown problem (by blaming both with different reasons, the author has muddled the situation even more), and finally, since it’s such a complex problem (according to the author), there’s no reason for the author to draw conclusions and that, again, this is just political bickering. This isn’t an actual real policy debate about real things affecting the real world. So readers, just ignore the fight. It’s no different than Monica and that dress. Nobody wants to get back into that, do they?’

    So yves, i just wanted to point out that section since you parsed it in other ways. It’s actually a classic process that most of these editorial authors use.

  19. Calsouthward

    What’s this about Obama’s mother working for
    Geithner’s father?

    Any confirmation?

  20. Buck Hayek

    Geithner and Bernanke get the last laughs.

    What happened to all you “extend and pretend” naysayers? OMG! The derivatives! The fake valuations? The world is falling!

    Of course you are all wrong and always will be. The banks raised capital via the Supervisory Capital Assessment Program – the Fed made the banks pony up $1.6 trillion in reserves that pays only .025% and the system lives. Bank balance sheets are nearly sublime now (in the USA).

    Thanks, President Obama.

  21. ChrisPacific

    Geithner said it was simply to help spread out foreclosures out over time, or “foam the runway”. I’m left with the image of a bank as an overloaded B52 with smoke coming out of one engine and its landing gear refusing to lower landing belly flat on a runway “foamed” with homeowners lying down, side by side, and crushed into bloody pulp as the aircraft hits the ground. That is, after all, pretty much what happened.

    They actually admitted to this outright in the Treasury meeting you attended, as I recall:

    Officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole.

    I can remember seeing red over that quote when you originally posted it.

    1. psychohistorian

      Laugh the global inherited rich out of control of “Western Societies” and into rooms at the Hague where they can be tried for the moral degradation of our socio-economic systems.

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