The Broad View

Obama won't have 100 days

I've been one of the most prudent people around, with no mortgage, no car loan (I drive a small 15-year-old Ford, very fuel efficient) — and credit card debt that was, until now, a very very small percentage of my net worth. Like most middle-class people, I'm a shareholder. (For reasons I fail to understand, "shareholders" are always lumped together with malignant management when politicians are eager to throw somebody under the bus as a conciliatory gesture to the almighty "taxpayer." What about when we're one in the same?) 

I'm 69, and one of those millions of retirees whose investments are meant to see one through the later part of life. I don't manage my investments — it's not my expertise — so I let a professional do it, someone whose prudence matches my own. But the markets are in free-fall, sucking into the vortex the assets of the imprudent and prudent alike. My "safety net," along with so many others', is in shreds.

January 20 can't come soon enough. And when it does, Obama won't have 100 days in which to begin instilling fresh confidence in the markets. He'll be lucky if he has 100 hours. He'll have to do something almost the moment he sits for the first time behind the desk in the Oval Office, something bold — something to lift the hopes of the nation and, indeed, the world — something to stop the terrible slide.

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[Update, Saturday Nov. 22] First Geithner, now this. It's a good beginning.

When a unicorn loves a leprechaun

H/t to Pat Baldwin. "Prickly City" copyright Scott Stantis. See it at Yahoo.

Credit thaw?

The market's been positive all day. That, in itself, is something of a relief. The Dow hovered in a relatively narrow (albeit triple-digit) plus range -- the steadiness, too, is a relief -- until it surged to +411 (+4.65%) at the end of the trading session on the New York Stock Exchange.

Commentators are saying that there are signs (too technical for me, with their acronymic flourishes) that the credit markets are at last beginning to thaw.

Bernanke's support of a projected stimulus package (which may be geared to infrastructure investment, if Congressional Democrats have their way -- rather than the tax cut Republicans prefer) may also have helped.

"Private sector loans, not Fannie or Freddie, triggered crisis"

I note with pleasure that the McClatchy site is on Paul Krugman's blogroll. It's on ours too.

Here McClatchy reporters David Goldstein and Kevin G. Hall offer a clearer picture than I've gotten elsewhere of just how deeply implicated (or not) Fannie Mae and Freddie Mac actually are (or aren't) in the sub-prime mess.

The story is far different from the one rightwing bigots would have us believe. Read the comments if you can bear it.

That was then

The good news came on Monday. DJIA and the other market indices wildly up. Today -- well, whoosh on the downdraft.

Got Dramamine®?

DJIA up 936 points at the closing bell

The companies that make up the Dow, the NASDAQ and the S&P 500 collectively added more than 11% to their market value today. Some commentators (I've pretty much settled on Bloomberg for market news on TV) are saying it's a "bear market bounce," bulls are tending to focus on industry sectors, and nobody is saying we're out of the woods. It's too soon after the close to read online and print punditry.

Today's big rise pretty much gets us back to where we were last Wednesday. Clearly the promise of cash infusions from central bankers around the world helped steady nerves. Paul Krugman (who, in case you hadn't heard, has won the Nobel Prize in Economics) tips his hat to Gordon Brown, British P.M. and his Chancellor of the Exchequer, Alistair Darling:

...[T]he Brown government has shown itself willing to think clearly about the financial crisis, and act quickly on its conclusions. And this combination of clarity and decisiveness hasn’t been matched by any other Western government, least of all our own.

Krugman blames Henry Paulson's initial plan on his and the Bush administration's ideology, and their resultant reluctance to exchange a government cash infusion for an ownership stake. Interestingly,

This sort of temporary part-nationalization, which is often referred to as an “equity injection,” is the crisis solution advocated by many economists — and sources told The Times that it was also the solution privately favored by Ben Bernanke, the Federal Reserve chairman. [Emphasis mine.]

Continuing to savage the current administration, Krugman concludes with this:

I also wonder how much the Femafication of government under President Bush contributed to Mr. Paulson’s fumble. All across the executive branch, knowledgeable professionals have been driven out; there may not have been anyone left at Treasury with the stature and background to tell Mr. Paulson that he wasn’t making sense.

Luckily for the world economy, however, Gordon Brown and his officials are making sense. And they may have shown us the way through this crisis.

We'll know only in the next few days and weeks whether a more confident mood continues to hold on Wall Street and in markets around the world. I hope, however, that thousand-point swings in the Dow do not become a permanent feature. Whiplash is whiplash, and when it occurs, it's a safe bet it's not indicative of safe driving.

It's the confidence, stupid

Post closing-bell update: TGIF. We have the weekend to steady our nerves, collect our frazzled brains and recover from today's whiplashing markets -- the Dow see-sawed 1,000 points today! It closed at 8,451, down 128 points but, as they say, "well off the session low." And the NASDAQ even has a little green arrow next to its name.

Volcker Update: He writes in the Wall Street Journal:

Fortunately, there is also good reason to believe that the means are now available to turn the tide. Financial authorities, in the United States and elsewhere, are now in a position to take needed and convincing action to stabilize markets and to restore trust.

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Even those companies with a good profit picture, substantial reserves, satisfactory cash flow -- in other words, whose fundamentals are sound -- are being sold off willy-nilly. It's pure panic. On the floor of the NASDAQ a little while ago a reporter said "It's out of control."

"Waterfall decline" is Bloomberg's way of describing the stock market crisis. CNBC is somewhat more shrill, calling it the "cascading crash." Whatever you call it, however, it is quite horrifying to watch the numbers. There is no confidence anywhere, and it seems that there are damned few who, by word or deed, can reinstill it.

The CNBC team is decrying the lack of leadership. They've invited financial industry leaders to step up to their microphones and provide a calming voice.

But who can break through the noise? Who has the credibility? Who is sufficiently at arm's length from the incumbent policy makers to provide a perspective that people can trust? Paul Volcker and Arthur Levitt come to mind, but neither one is without controversial current and past associations; and their policy decisions had a mixed bag of results in their former incarnations as Fed chairman and head of the SEC, respectively. Volcker, of course, is also an economic advisor to Barack Obama.

Any others you can think of?

Do we have a "Plan B"?

Chart: NYTimes

I'm starting to hum "Remember My Forgotten Man" and "Blue Skies" and screen all those Depression-era films in my head.

I guess the big bailout package wasn't the be-all and end-all, after all. But wait! There may be some hope...

Here's Krugman and he's pretty shrill:

The response to this downward spiral on the part of the world’s two great monetary powers — the United States, on one side, and the 15 nations that use the euro, on the other — has been woefully inadequate. [...]

The United States should have been in a much stronger position. And when Mr. Paulson announced his plan for a huge bailout, there was a temporary surge of optimism. But it soon became clear that the plan suffered from a fatal lack of intellectual clarity. Mr. Paulson proposed buying $700 billion worth of “troubled assets” — toxic mortgage-related securities — from banks, but he was never able to explain why this would resolve the crisis.

What he should have proposed instead, many economists agree, was direct injection of capital into financial firms: The U.S. government would provide financial institutions with the capital they need to do business, thereby halting the downward spiral, in return for partial ownership. When Congress modified the Paulson plan, it introduced provisions that made such a capital injection possible, but not mandatory. And until two days ago, Mr. Paulson remained resolutely opposed to doing the right thing.

The British, Krugman explains, are taking the lead and doing just that: injecting ₤50 billion with interbank transaction guarantees. Hopefully, Europe and the U.S. will get on board with similar and coordinated plans.

They will have the opportunity this weekend with two important meetings scheduled of top international financial officials on Friday and the annual IMF/World Bank meeting the following two days. Krugman warns that they must seize this chance to forge a global rescue plan that they agree upon in principle, at least.

What should be done? The United States and Europe should just say “Yes, prime minister.” The British plan isn’t perfect, but there’s widespread agreement among economists that it offers by far the best available template for a broader rescue effort.

And the time to act is now. You may think that things can’t get any worse — but they can, and if nothing is done in the next few days, they will.

The Blame Game

The Blame Game. Sarah Palin dragged out that motheaten phrase again tonight, when rebutting Biden on a question of Middle East policy:

No, in fact, when we talk about the Bush administration, there's a time, too, when Americans are going to say, "Enough is enough with your ticket," on constantly looking backwards, and pointing fingers, and doing the blame game.

We first started hearing that phrase from Republicans in the wake of Hurricane Katrina. They were frantic to rush past any scrutiny of the administration's complete failure to act while an American city was drowning. It's a cynical attempt to evoke indulgence for heroic bureaucrats struggling with a difficult situation. Once the magnitude of the administration's criminal negligence became apparent, the choruses of "We don't want to play the blame game," were yodeled at every press conference by everyone from Bush down to the lowliest party hack.

Yeah, I'll bet they didn't want to play the blame game. Why? Because they were to blame! Bush and his incompetent flunkies deserved to be blamed. And if they managed to avoid blame, nothing would be learned. Nothing would be done. When bodies are floating in the brackish water of a flooded American city for days -- in a horror show that was totally avoidable -- you bet someone should be blamed and someone should pay a price.

The point is, when Palin tried to accuse Biden of "pointing fingers and doing the Blame Game," his -- and every Democrat's -- response to the accusation should be unequivocal: This isn't a game. It's deadly serious and when a disaster occurs because of an administration's negligence or incompetence, someone must take responsibility and the blame.

The Blame Game is trying to stage a comeback these past few weeks, while the Republicans and the administration are again refusing to play. After all, we have to save the global economy and we can't afford to stop and play blame games, now can we?

If we don't have the courage to affix blame for these monumental disasters where it belongs, and make those responsible pay a price, we shouldn't be surprised if we're bailing out another city and another economy before too long.

So next time a self-serving Repug tries to make a Democrat sound like a cavilling kill-joy for "playing the Blame Game," you know who to blame.

Blog brother Lowell Feld (reluctantly) says bill should pass

Honorary broad Lowell Feld, one of my best buds from the heady days of Wes Clark's presidential campaign, left behind his career at the Department of Energy to set up Raising Kaine, which has gone from being a site promoting Tim Kaine for Virginia governor to being the go-to site for all things political in Virginia.

In a piece today, lauding "soon to be Senator" Mark Warner's take on the rescue bill (calling for passage, Warner had said that the House was playing Russian Roulette with the economy), Lowell weighs in with this:

...Sure, I'd love to see a much better bill, maybe even a completely different bill. But as the saying goes, the process of legislation being made in Washington is like watching the making of sausage - not pretty, in other words.

And there's no doubt that this bill, the Emergency Economic Stabilization Act of 2008, is a (messy, flawed) hunk of sausage. In other words, it's a compromise on an extremely complex, intricate, important subject - keeping our economy from melting down as credit markets freeze up and stock markets plummet. Reluctantly, I must say that it is also probably the best (I can see a few tweaks getting incorporated) option that can be accomplishment [sic] at this point given the alignment of political forces in Washington, DC - Shrub in the White House, a closely divided Congress, an election looming, etc. Again, I'm not talking what's IDEAL, I'm talking about what's PRACTICAL...

Lowell's got a great mind and a cool head. Give him lots of bloggy love.