Ezra Klein Deems Joe Stiglitz, Paul Krugman, and Elizabeth Warren (Plus Other Serious People) Not Credible

Ezra Klein demonstrated how far he’s has to descend into the Humpty Dumpty world of words meaning just what he chooses them to mean in order to defend failed Administration policies.

Washington DC’s Baghdad Bob waded into the fray over a an unconvincing apology in the New York Times for Obama’s bank-friendly response to the mortgage crisis. It wasn’t hard to see this piece as dictation. While it’s now acceptable for the messaging apparatus to describe the policies as inadequate, the party line is lame: there was no support for bold measures and those big bad servicers were an insurmountable obstacle. Help me.

So what is Klein’s attempt at a save? He repeats the canard about the lack of political support for bold action and tries to fob this one off:

The right question on housing, then, is not whether the administration’s policies proved insufficient. They did. It’s what would have been better. And that’s not a question that either Appelbaum or Goldfarb conclusively answer. It’s not even a question that the most credible critics of the Obama administration’s housing policies conclusively answer.

Huh? Sorry, plenty of people vastly more credible than Klein had concrete recommendations at the time that would have been considerably better than Obama-Geithner program of coddling the banks.

For instance, Princeton economist Alan Blinder recommended a Home Owners Loan Corporation style mass refinance. She Who Must Not Be Named came out for it in her campaign. Joe Stiglitz, Paul Krugman, Nouriel Roubini, Mark Zandi, Jeff Merkley, Brad Miller, Ellen Seidman and others backed it. Krugman and Neil Barofsky have also argued the Administration could at a minimum have used $50 billion in unused TARP funds for mortgage mods. Adam Levitin (arguably the top US expert on mortgage securitizations) recently proposed a “bad bank” as a way to implement pooling and standardized restructuring of underwater mortgages. Top mortgage analyst Laurie Goodman has also long advocated principal modification, and she has established that they have much lower redefaults than other types of mortgage modifications.

Or how about using bankruptcy to write down mortgages to the current value of the house, something now done in bankruptcy for every type of collateralized loan except primary residences? Advocates of that approach included the Congressional Oversight Panel under Elizabeth Warren’s chairmanship, and more recently, the IMF. A bill passed in the House but was nixed in the Senate.

How about principal writedowns with shared appreciation mortgages, advocated by Andrew Caplan and Luigi Zingales? Even Greg Mankiw pointed to an approach suggested by John Geanakoplos and Susan Koniak a way to work around those pesky servicers. Dean Baker has pushed for an own to rent program.

This is far from a complete list. There were plenty of credible people who had concrete, specific proposals which would have done better than what the Administration implemented. When the benchmark is HAMP, which managed to make hundreds of thousands of borrowers worse off, or a mortgage settlement that institutionalizes servicer fraud and has already harmed mortgage investors helping pay for the settlement, it’s a low bar to beat.

So if you were honest about this issue, no matter where you draw the line, there were “credible” people who had proposals that were obviously better. And the evidence in part comes in the New York Times article that Klein mentions. It concedes that bankruptcy cramdowns might indeed have been a better idea than the Administration’s limp-wristed response. And don’t tell me Obama couldn’t have gotten this through. He was willing to whip personally to get Bernanke’s contested reappointment approved; he didn’t apply anywhere near that level of effort to this initiative. As Adam Levitin notes:

There’s no getting around the matter–the Administration truly flubbed things on housing policy, and its critics at the time said that the timid course of action would rebound to serious long-term economic problems and loom over the President as the 2012 election approached. It’s not like the Adminsitration wasn’t warned repeatedly, directly, and credibly. The Adminsitration instead chose to listen to a different group of “credible people,” and is paying the price.

But the interesting question is why is Klein pushing this barmy PR so hard? In part, he is relying on Democratic tribalism, that many of the people who were on the right side of this issue won’t call him out because no proper soi disant liberal would go after Administration lackeys when *gasp* Romney is in the wings. Elizabeth Warren clearly won’t, nor will Krugman. Stiglitz seldom deigns to respond to ankle-biters like Klein.

And the mortgage/housing issue is charged because, as Barofsky stressed, the Administration deliberately chose to use homeowners to foam the runway for banks. Damon Silver, associate general counsel for the AFL CIO and a member of the COP, identified what was really at stake in a 2010 hearing:

That of course means that it is a priority for Obama to obscure the fact that he chose the banks over ordinary citizens on housing, the single biggest source of wealth for most families. Reader Jill parsed it nicely:

Facts must be swept aside and replaced by “solving” the political problem. The problem is Obama was and is a lackey of the finacial industries. This truth must be erased from people’s minds…

The entire campaign coverage seems bent towards “solving” a political problem, not helping peope to understand what is really going on.

(Let’s not forget all those phone calls Obama made for TARP, his stripping out of real penalties even before he took office. Then hiring Geithner? Yep, he only wanted to best for the people!)

It would be great if we had campaign coverage that was about the reality we face, not about “solving political problems” of the elites. There’s a real difference in what that type of reporting looks like and an equally important difference in the effect it would have on an informed populace in a voting both and as a organized force of resistance to injustice.

So to defend this Administration’s sorry record, loyalists like Klein have gone from practicing sophistry to agnotology. In a perverse way, that’s encouraging, because it’s a sign that it’s becoming more difficult for the pundit class to deny the facts on the ground.

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  1. Hugh

    Some of us non “credible” types noted back in 2008 that cramdowns would never happen because they would expose the underlying insolvency of the banks, that is if cramdown valuations were applied to the rest of banks’ balance sheets they were sunk. This was also why FASB rules were modified to allow banks to cook their books and substitute mark to fantasy valuations for mark to market ones.

    1. The Bulb

      Bingo. All these articles treat “mortgage debt” as a single class of creditors. Pursuing cram downs or wholesale forgiveness would result in the write-off of billions in 2nd lien HELOC loans held by the top 4 banks. Obama chose to save the banks and left homeowners in the meat grinder.

    2. Greg T

      Exactly. The banks had to avoid a ” trauma event” like mass bankruptcies to avoid being exposed as insolvent and thus taken into receivership. Then, yikes, no more bonuses for Jamie Dimon or Vikram Pandit!!! Tim Geithner has been tending to the interests of Wall Street from the off. The administration’s pro-bailout, leniency for the banks has been cleverly disguised as an heroic deed — we were saved from a Great Depression! Neil Barofsky confirms as much in his fine book BAILOUT. Helping homeownwers was never the plan. Keeping the banks on IV was. Barack Obama was catapulted to office with huge assistance from Wall Street. He is simply repaying the favor.

    3. JustAnObserver

      Without FASB capitulating & allowing the return of mark-to-fantasy there was no way the subsequent stress test Kabuki would have been able to fool the public into believing that the initial TARP bailouts had “succeeded” and just a little bit more recapitalisation was all that was needed before bonuses could return.

    4. nonclassical

      ..when is it time to admit that bushbama (Malcolm rolls in grave) intends to sell out “Social Security” to Wall $treet…who wants nothing more than their hands on “guaranteed” (quantitative easing 347?) taxpayer funds for “investment”=monopolization of ever more commodities-derivatives-futures markets..ever more casino capitalism…

      bushbama is an insult to the political left…the “professional” (educated) left…

  2. YankeeFrank

    Obama is indeed a lackey of the banks. Its pretty funny how they are thanking him by moving over to Romney. Its rather perverse of them though, given all he has done for them. Just another sign of how completely deluded they are. Don’t they realize that a Romney administration would be a lot less able to give them the kitchen sink, given the way the democrats would likely mobilize against any bank-friendly policies Romney implemented? Or would they… it is astonishing how completely the entire political class of the country the size of the USA can be bought by one industry. Then again, I guess its not given that its taxpayer money that they use to buy the pols in the first place.

    1. Working Class Nero

      If the banks really wanted to get rid of Obama they would rave about what a great job he has done protecting their interests and they would be loud and proud about supporting him. On the other hand, the best way the banks can help Obama win re-election is to support his opponent and pretend that he has been really, really mean to them.

      1. SqueakyRat

        Except everybody knows that if they pretend to be against him, they’re really for him, which will make everybody hate him, so he’ll lose, which is really what they wanted all along.

        1. SqueakyRat

          Except oh wait, they really like him ’cause he protected them, so they’re pretending to be against him to fool the people who think they’re for him so they’ll vote against him except they’ll read this post and realize they should vote for him anyway.

    2. Jim

      As obsequious as Obama has been to the banks, he’s a populist compared to the reactionaries in Europe.

      Draghi and the “small group of far sighted statesmen” have subverted democracy and are attempting to forcefeed a US of Europe to a continent that does not want it.

      Yet, if I polled most of you, I’d be willing to bet that more of you approve of Draghi’s actions than of Obama’s.

      Go figure.

  3. donna

    Recapitalise bank’s is first the important step…how ?
    we all know this is crisis bankar ..(money)..

  4. jake chase

    The Democratic Party has completely abandoned its natural constituency and become just another party of corporate property. This fall’s election is only about which set of scoundrels will get to immerse their snouts in trough of federal largesse. Anyone not personally involved who cares deeply about the result should not be trusted with any important decisions.

    1. nonclassical


      …that’s what D.L.C. is for…Clinton’s largest supporters were also George HW Bush supporters…anyone NOT D.L.C. experiences Howard Dean-like “scream”..

  5. Conscience of a Conservative

    Neal Barofsky summed up the administration’s approach when he wrote that Geithner only wanted to “foam the runway” for the banks. The goal of Treasury was to slow down foreclosures just enough so that banks would not be over-whelmed. It was never about rule of law, or holding banks accountable to it or clearing out the foreclosure pipeline and letting homes find their natural pricing level. To the contrary we came up with temporary tax credits to buy homes, did everything imaginable to make mortgage rates lower and came up with marginal programs to modify some but not many mortgage payments.

    1. jake chase

      Barofsky was very credible today on Squwak Box where the usual collection of media airheads pulled every dirty trick in an effort to dismiss him. At one point he replied to that despicable Leesman (Lessman?) by characterizing his criticism as silly. Finally, they just refused to let him answer their idiotic questions and thanked him for coming.

      Can anyone believe the bunk spouted that network? I sometimes wonder if even the prices running by on the screen are fabricated.

        1. AA+ Bonds

          And, tellingly, Wall Street P.R. is mainly packaged and sold to other Wall Streeters.

          Why bother with the plebes? They don’t get a say.

  6. fresno dan

    Most people simply do not believe their own ideolgies. Advertizing tells them Blue is less filling and tastes great, or that Red gets their clothes 143% cleaner.
    Republicans vote for Bush, who was a big government-big deficit guy, (medicare entitlement, no child left behind), nation building (despite advocating a “humble foreign policy”)and free market propaganda but in reality the biggest bail out ever by a treasury that is indistinguishable from Goldman Sachs…
    And Obama is so close to Bush that getting a piece of paper between them is impossible.



  7. Cybil

    I guess I am confused why anyone else is confused. It was made blindingly clear with one quotation that screwing the people was THE plan.

    “We saved the banks but lost America,” by none other than Treasury Secretary Geithner.

    I liken this to an bank robbery (in the name of the people) where the Obama clown show wasn’t looking for solutions, they were assuring there were none.

    Wake up, “people.” It’s time to clean house and throw ALL the cartel bums out. You take fraud cash you’re out.

  8. Aaron Layman

    Great post as usual. Had this discussion on the wormhole (FB) a few days ago with a few ideological Dems, one who’s child was active in the Obama election campaign.

    I find it interesting that so many are eager to dismiss hard evidence to perpetuate their faith that a “party” will save them. The party is nothing more than an artificial construct, much like that corporate charter construct. Its inevitable goal is to justify its own existence and extend its reach and power.

    1. indio007

      TThe state is an artificial construct. There are only men and women.some of them hide behind the law of limited liability . No one is being held accountable for what they do while in “office “. Its Carte Blanche to do whatever you want and hang the downside on other people.

  9. annie

    interesting that klein and yglesias were even younger under bush but smarter then. then it was all about bad wars and bush/cheney. once the banks blew up and it became necessary to understand the economy–and not as taught in school–they were at sea. far better if they admitted ignorance and didn’t opine on the issue. instead they feel compelled to fake it, or take the word of their sources.

    1. Ned Ludd

      Both Ezra Klein and Matthew Yglesias advocated for the invasion of Iraq. Klein, when asked about it later on Pandagon, said he saw the types of people protesting the war, and he didn’t want to associate with them.

      Josh Marshall also backed the war. Instead of being discredited, these three gained influence. They showed their establishment cred and got promoted (in Marshall’s case, financial backing) to become prominent voices of liberalism.

      1. ltr

        Both Ezra Klein and Matthew Yglesias advocated for the invasion of Iraq. Klein, when asked about it later on Pandagon, said he saw the types of people protesting the war, and he didn’t want to associate with them.

        Josh Marshall also backed the war. Instead of being discredited, these three gained influence. They showed their establishment cred and got promoted (in Marshall’s case, financial backing) to become prominent voices of

        [Are you ever right.]

      2. liberal

        “Josh Marshall also backed the war.”

        The blogger uggabugga once “diagrammed” the network of war supporters. JM was isolated except for his connection to Kenneth Pollock [spelling?], which for some reason at the time I thought was very funny.

    2. Jessica

      I think they are bright enough to learn enough economics quickly enough if they were sincere.
      Maybe their rising position in the punditocracy is what accounts for their falling apparent intelligence.

    3. JerseyJeffersonian

      Oh, it’s easy enough to see how it works. Just call to mind that famous quote from Upton Sinclair:

      “It is difficult to get a man to understand something when his job depends on not understanding it.”

      All stands revealed, no?

  10. wbgonne

    One of the things that is destroying America is our lack of accountability. That must change. We must begin naming names and saying j’accuse to those who hold positions of power but betray the public for riches or fame or cache at DC cocktail parties. We must skewer, mock and vilify the Liberal Opinion Leaders (“LOLs”) who cheerlead for the monstrous Obama Regime. Ezra Klein is a great start. But here are some other LOLs and each deserves scorn and ridicule: Greg Sargent, Kevin Drum, Matt Yglesias, Steve Benen. In fact, all one need do is look at Greg Sargent’s Plumline WaPo blog and one will see the LOLs citing each other and patting one another on the back. Meanwhile, as the estimable David Dayen says, the “Great Debate” in Washington excludes everyone to the Left of David Broder. Time to name names. Time to make people uncomfortable.

    1. wbgonne

      I forgot to include the Godfather to many of our current LOLs: Josh Marshal deserves a special place in hell.

  11. Bridget

    John Hussman has been advocating the concept of shared appreciation mortgages for years. I was unaware that others had written on the subject. Many thanks for the reference to Andrew Caplin. After Googling him, I came up with this:

    It’s a tragedy for homeowners, investors, taxpayers, and future generations that we got a boot-lick like Geithner instead of someone who could solve the problem

  12. Mark

    You can’t have a significant principle reduction without the corresponding bond failures. That’s why it will never happen, the sub-primes hold better value if left off the auction block until the price is met or a large # of people show at auction to bid the price up. It’s an inflationary monitary spiral that has no end.

  13. ep3

    Yves, in regards to Jill’s post, which is excellent, as I have said, with the pick of Ryan, that shows that this election is all about “fixing” the entitlements. Fixing them for the elites. No where is there talk about removing obama’s fica tax cut (how is that affecting the budget and the solvency of SS? nobody is mentioning that cost. it’s now assumed that SS taxes have been permanently cut.)
    Republicans are claiming they won’t cut medicare, yet their plan does. And obama claims his cuts actually make things better.
    So housing, jobs, etc. etc., everything is being tied to entitlement costs.

  14. Claire

    Back in June 2011, Owen Paine summed up all that anyone needs to know about Ezra Klein in three sentences:

    “Ezra Klein is a worthless hank of dog hair. He belongs on a pet-barbershop floor, not where he is, wherever that is, that gets him quoted like he’s the nuncio from liberal common sense. Why he isn’t even a good chew toy.”


  15. MRW

    Smart remarks: “So to defend this Administration’s sorry record, loyalists like Klein have gone from practicing sophistry to agnotology. In a perverse way, that’s encouraging, because it’s a sign that it’s becoming more difficult for the pundit class to deny the facts on the ground.”

    Can’t come fast enough.

  16. TK421

    “Why can’t the liberals learn to doublespeak?”

    “I’m getting indefinitely detained in the morning”


    “All I want is a drone somewhere
    Hellfire missiles streaking through the air
    Body parts lying here and there
    Oh wouldn’t it be lovely?”

  17. EoH

    Who controls the past controls the future; who controls the present controls the past. Further elaboration can be found in Room 101.

  18. LAS

    As bad as Obama has been, I’ve no doubt things will be worse under Romney/Ryan, particularly now that it is really Rove($$$)/Romney/Ryan.

      1. Capo Regime

        +10. Next LAS will be telling us about lesser of two evils and how the dems are really good and the repubs are just big meanies…..Indeed such a level of cluelessness while suprising does explain a lot given its a post on NC and not KOs or USA today–imagine what they think!

  19. Glen

    You know, I’m pretty much a dumb fucker when it comes to Wall St and finance, but it was extremely obvious to even a DF like me that giving trillions to the banksters that caused the world economic implosion and smashing the suckers that paided overinflated prices with toxic loans was not going to do anything to fix the economy, but was great for kicking the can down the road (but I seriously question if Obama can kick it far enough to get in two terms as President).

    But all that aside, how do I get such a sweet paying gig at the Post AND retain my innate ability to be such a DF like Klein? I do DF really well.

      1. AA+ Bonds

        That’s the weird part – Klein didn’t go to the “right school”, and in fact, he never finished his undergraduate degree. He’s no genius or self-taught thinker, either, and writes his blog by parroting real economists writing elsewhere, often getting the details totally wrong because he doesn’t grasp the fundamentals.

        It’s a real fucking mystery why he has the position he does – and I’m serious, there’s something that he and someone else aren’t telling the rest of us.

  20. Capo Regime

    As much as I like the light shed on Ezra Klein, is it really needed? Anybody with a basic grasp on reality knows that Ezra Klein is a sychophantic twit. What is interesting is how did he get to hae such a role in the WAPO. Not an Ivy leaguer, never did anything interesting, soft academically and a true suck up? What is the story here? Such a hack must have an incriminating photo on one of the members of the Gramm family or other key folks at the WAPO companies….Only way it makes sense.

    1. Yves Smith Post author

      1. It’s late August so the catfights are for the most part more entertaining than the news

      2. Ezra & Co need to be reminded if a pro middle class regime ever comes back (unlikely I know but unlikelier things have happened), people are on to them.

    2. AA+ Bonds

      Serious people kiss Klein’s ass. Krugman quotes him approvingly and then ignores him when he’s flat wrong, which is more often than not. They all need the fear of God put into them.

  21. SFGale

    I hope that all of the howling at the moon in the preceding posts has brought some satisfaction.

    But I’ll take Klein’s side in this discussion, partly because I like the odds.

    For all I know, Stiglitz, Krugman, et al could be right. But if they can’t get it through Congress, they are also irrelevant. And to pursue paths of irrelevance deliberately and repeatedly earns Klein’s judgement of ‘not credible’.

    For all I know, Obama may indeed be Wall Street’s whore, and not simply sucked into a vortex of circumstance that rapidly evolved from an attempt to stabilize the system to becoming its captive and enabler.

    But nothing I’ve heard convinces me that all the ‘smart and honest people’ have a clue about how to get their pet prescriptions through the cesspool that is our current, and probably next Congress. Nor does anyone suggest credibly how Willard will do anything better but possibly find cover in countless obfuscation, as he’s done so successfully to date.

    Yes, Obama et al have succeeded only in kicking the can down the road, as have his contemporaries in Europe, Japan and China. It’s not as good as a solution, but its better than the dumb-ass bravado of saying ‘let the whole system collapse’, particularly by people who most likely have not educated themselves about the last depression to have a clue about what the next one will look like.

    If not Obama, who? If who, what? And what chance will ‘What’ have among the raging little religious ayatollahs in our Kamakazi Kongress hell-bent on torpedoing the economy and the Country in the name of a twisted perversion of freedom that will destroy what’s left of the middle class, no less than the banks?

    1. AA+ Bonds

      “But nothing I’ve heard convinces me that all the ‘smart and honest people’ have a clue about how to get their pet prescriptions through the cesspool that is our current, and probably next Congress.”

      Willful obfuscation or unaware ignorance on your part. What is being discussed is what Obama could have done in 2008-2010 with a Democratic Congress, according to people writing at the time; what would have helped these plans is support from the President. Stay on topic.

  22. AA+ Bonds

    “Stiglitz seldom deigns to respond to ankle-biters like Klein.”

    Why should anybody? Klein’s credentials are that he dropped out of college to write a blog. Krugman plays him like a harp whenever they agree, and ignores him otherwise.

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