Recently in It's the Economy, Stupid Category

Via Sully, CNBC takes a few more hits from "serious people":

Yale University chief investment officer David Swensen pulls a Stewart:

Jim Cramer exemplifies everything that's wrong with the advice -- and I put advice in quotation marks -- that is given to individual investors. Investing is a serious business. We're talking about retirement security of American citizens, and he turns it into a game. It's a game where his listeners lose. It's ridiculous. These high-turnover, rapid trading strategies enrich the brokers. If you look at Jim Cramer's approach on an after-fee, after-tax basis, the individual doesn't have a chance.

Stewart has so far devastated Cramer by simply showing evidence of his terrible, terrible judgment on stocks. The Bears stuff was just brutal - and Cramer's inability to take responsibility, like the neocons who still refuse to concede their Iraq mistake, makes him look weak. But then there's James Poniewozik. ... You want to look away.

Jon Stewart has been there to express the outrage that most of us everyday people feel about what's happened on Wall Street and in the financial sector. His initial take on the chattering classes, particularly on CNBC, was absolutely must-see TV. He exposed Rick Santelli and the rest of the CNBC barkers for the carnival of fools that they are.

For the record, the next segment of that March 4th show was an interview with Joe Nocera of the NY Times which is one of the best explanations I've seen so far as to what's going on. But let's move on to the continuing saga of Stewart holding CNBC accountable for their fast and loose chatter.

The talking heads of CNBC took offense at The Daily Show's summary of their squawking, appearing on various other media channels to voice their displeasure. Finally, Jim Cramer of CNBC showed up last night on The Daily Show. He probably should have stayed home. Here's what happened, courtesy of the This Week with Barack Obama blog.

Part Three and the outtakes are below the fold.

Barack Obama's first press conference was a new experience for me or at the least, one that I haven't had for a long while: listening without cringing or suppressing the desire to throw things at the TV. Listening to someone who can deliver complete and well-thought-out sentences on a wide range of topics extemporaneously, someone who understands the material about which he is speaking as opposed to someone who is parroting memorized phrases that he thinks have something to do with the topic at hand, was such a pleasure.

Here's the video. If for some reason you had to miss it, you'll find his opening statement of interest.

Josh Marshall made this point after the press conference.

I think the power of President Obama's presentation tonight speaks for itself if you saw it. (Below I've included his answer to the first question on the economy, which was the essence of the press conference.) There's an important debate about the proper outlines of stimulus bill. But there's little serious debate over whether a large bill, predominantly focused on spending, is necessary. And yet that's what the Washington discussion has been about.

Yet the real key to understanding that press conference is in information that came out earlier today: two polls showing the public is overwhelming on Obama's side in this battle (see Gallup and CNN). According to Gallup, 67% of the public supports Obama on the Stimulus Bill versus 31% for congressional Republicans. 58% of Americans disapprove of the Hill GOP's stand on this issue.

What's most striking about these numbers is the continuing disconnect between the mood of the capital and that of the country. For me, a lot of that is a product of how Washington continues to be wired for Republican control. A president, and particularly one like Obama, is the one person who is in a position to cut through that.

Well, it's clear that the villagers and the chattering class haven't figured out what the people of Elkhart, Indiana (my parents live there) and the rest of the country know all too well. It's bad, really bad and getting worse. This is not the time to be screwing around scoring political points.

[Sidenote: Obama gave his speech in the gymnasium of the high school that a couple of my siblings graduated from. My brother's name is still on the wall along with the record he set in the mile in the 70's.]

On the other hand, the longer the Republicans do this to please the increasingly extreme right wing fringe that constitutes their base, the more irrelevant they become in US politics. Wonder when they'll figure it out.

Obama served warning last night. This is serious. Our nation gets it. 2009 is going to be tough. Let's move forward. Get this stimulus package passed now.

Paul Krugman has a message for the Washington crowd: don't compromise our future.

It's time for Mr. Obama to go on the offensive. Above all, he must not shy away from pointing out that those who stand in the way of his plan, in the name of a discredited economic philosophy, are putting the nation's future at risk. The American economy is on the edge of catastrophe, and much of the Republican Party is trying to push it over that edge.

Well, Mr. Krugman, your wish is granted.

Obama had a few words to say at the Department of Energy yesterday. [via]

Then President Obama spoke to the House Dems last night at their retreat. He gets it.

Start at the 2:30 point to skip the opening thank yous.

Memorable points from his speech:

We can't embrace the losing formula that says only tax cuts will work for every problem we face; that ignores critical challenges like our addiction to foreign oil, or the soaring cost of health care, or falling schools and crumbling bridges and roads and levees. I don't care whether you're driving a hybrid or an SUV -- if you're headed for a cliff, you've got to change direction. (Applause.) That's what the American people called for in November, and that's what we intend to deliver.

[...]

If we do not move swiftly to sign the American Recovery and Reinvestment Act into law, an economy that is already in crisis will be faced with catastrophe. This is not my assessment. This is not Nancy Pelosi's assessment. This is the assessment of the best economists in the country. This is the assessment of some of the former advisors of some of the same folks who are making these criticisms right now.

Millions more Americans will lose their jobs. Homes will be lost. Families will go without health care. Our crippling dependence on foreign oil will continue. That is the price of inaction.

This isn't some abstract debate. Last week, we learned that many of America's largest corporations already laid off thousands and are planning to lay off tens of thousands of more workers. Today, we learned that in the previous week, the number of new unemployment claims jumped to 626,000. Tomorrow, we're expecting another dismal jobs report, on top of the half a million jobs that were lost last month, on top of the half a million jobs that were lost the month before that, on top of the 2.6 million jobs that were lost last year.

For you, these aren't just statistics. This is not a game. This is not a contest for who's in power and who's up and who's down. These are your constituents. These are families you know and you care about. I believe that it is important for us to set aside some of the gamesmanship in this town and get something done.

[...]

Understand the scale and the scope of this plan is right. And when you start hearing arguments on the cable chatter, just understand a couple of things. Number one, when they say, well, why are we spending $800 billion -- we've got this huge deficit? First of all, I found this deficit when I showed up. (Applause.) Number one. (Applause.) I found this national debt doubled, wrapped in a big bow waiting for me as I stepped into the Oval Office.

Number two, it is expected that we are going to lose about a trillion dollars worth of demand this year, a trillion dollars of demand next year because of the contraction in the economy. So the reason that this has to be big is to try to fill some of that lost demand. And as it is, there are many who think that we should be doing even more. (Applause.) So we are taking prudent steps.

It's worth it to listen for those points. His delivery says more than the words on the page.

It's time to put the whiny, impotent naysayers in their place, grasp the hands of those who are willing to put the country first, step up and get this bill passed ASAP. And just remember who was in charge of Congress from 1994 to 2006 and the White House from 2001 to 2008: the people who deregulated because government rules were getting in the way. Those rules that protected your hard-earned wealth were blown away or pushed to the side. That wonderful economy that everyone admired ... all smoke and mirrors and now we're seeing what happens when the mirrors are broken. So when those same people who ran our country and our future into the ground start objecting, just remember they don't have your best interests at heart. In fact, they don't give a damn.

Barack Obama adds one more tool to his arsenal of things he's doing differently as president. His op-ed in the Washington Post within the first two weeks of his inauguration indicates that he's choosing lots of different communication venues to make the case for his initiatives.

In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis -- the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive.

I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change. They know that we have tried it those ways for too long. And because we have, our health-care costs still rise faster than inflation. Our dependence on foreign oil still threatens our economy and our security. Our children still study in schools that put them at a disadvantage. We've seen the tragic consequences when our bridges crumble and our levees fail.

[...]

These are the actions Americans expect us to take without delay. They're patient enough to know that our economic recovery will be measured in years, not months. But they have no patience for the same old partisan gridlock that stands in the way of action while our economy continues to slide.

So we have a choice to make. We can once again let Washington's bad habits stand in the way of progress. Or we can pull together and say that in America, our destiny isn't written for us but by us. We can place good ideas ahead of old ideological battles, and a sense of purpose above the same narrow partisanship. We can act boldly to turn crisis into opportunity and, together, write the next great chapter in our history and meet the test of our time.

I think he's talking to you, Congress. The rest of us already get it as he acknowledges in his writing.

[via]

I was discussing what must change about how our economy is viewed this morning with my husband as I was making coffee. Then I sat down and found this powerful bit of analysis about Pfizer's bid to acquire Wyeth. And it illustrates my point beautifully.

This assessment of the proposed merger by a WSJ commenter sums up the first part of the problem identified by the blogger:

I don't get it. Why do the investment analysts and business journalists go along with this sham? The previous mergers have not worked in providing value to the shareholders as other posters have noted. The analyst and journalist should be screaming against this merger if they were true to the principles of long term growth and value. There seems to be a conspiracy of idiots looking to make a quick dollar.

Comment by Anonymous - January 23, 2009 at 12:23 pm

The blogger Minerva concludes:

The bulk of US innovation in the past decade appears to have occurred in variations on bogus financial instruments, and in the concoction of outrageous ponzi schemes.  

Meanwhile, as marketers, financial whizzes, and patent attorneys slowly crushed the life out of our world-class research labs - and out of our world-class scientists - many of our brightest students in younger generations deployed a cold-eyed calculus to abandon science and engineering and pursue easy $ millions on Wall Street or in "hedge funds" (i.e., legalized gambling).

Not a good outcome for society.

We woke up last year to the reality that most of the US economic growth over the last decade has been pure illusion, amounting to little more than a zero-sum transfer from the many struggling to get by to the few super-rich.

Meanwhile, our infrastructure for real innovation - that drives real economic growth - and in the pharmaceutical area can make a real difference in people's lives - has been badly battered, twisted, and atrophied.

And its not just pharma - many elements of this decline echo loudly across the empty corridors in other industries - think electronics or automotive - that the US broadly dominated in the 20th century through the consistent introduction of innovative products.

And after Pfizer buys Wyeth (assuming that the gravitational force of the black hole proves irresistible) and empties out all Wyeth's labs - and another half of its own labs - our capacity to innovate (however its been misdirected of late) will be that much smaller and that much weaker.  

Dozens of programs will be abandoned.  No drugs will be closer to approval.  Thousands of fed-up scientists will likely abandon the industry.  

Enbrel commercials may get a little bit snappier.  The sales reps will be hotter.

And the bottom line: Pfizer pursuing "it's only option" will look like a great deal to Wall Street.  

At least until the next round, probably circa 2012, by which time Pfizer's stock price will be in the single digits.

Which brings us back to what I think is the most profound question posed by the Obama transition:

Was the Bush Administration, with its myriad failings in every policy and regulatory sphere, the disease -- or really only just a symptom of something bigger, and worse?

It's a symptom.

We need to refocus on valuing the industrial part of our economy - the part that creates and makes real things whether they be pharmaceuticals, cars, or green energy technology. The part that employs tool and die makers, master carpenters, scientists, people who create and make real things.

Too much emphasis on the ponzi scheme that is Wall Street and the service industry has left our economy in shambles. To the extent that Wall Street damages industry's ability to create and make real products, it is damaging the future of our country.

People need to understand that.

That Wall Street traders are doing this solely for short-term gains in wealth among a select population without regard to its impact on the long-term future of the country is the behavior, the ethos that must be changed.

Awhile ago an AIG media guy named Peter Tulupman responded to a post by one of the Front-pagers aka Contributing Editors at Daily Kos which, in turn, started the building of a list of questions for AIG. [1, 2, 3, 4, 5]

Look what's happened now.

This interactive format is not typical for most companies, including AIG. Our communications to the public have generally been our SEC filings, press releases, and presentations to investors, industry analysts, and other members of the investment community. But we understand our company is in a very different position since we received support from the U.S. government, and we wanted to try something different to be more accountable to taxpayers.

We know that there are tough questions out there. Some questions we may not be able to answer, and if that's the case, I will try to explain why. Other questions may take time to answer, as we gather accurate information from proper channels.

Finally, we know many questions will revolve around the day-to-day decisions AIG makes as a business. AIG's top priority is to pay back the U.S. government's investment in AIG. To do that, we have to make the decisions necessary to run our business successfully. We know that our business rationale for some of those decisions may not always be accurately portrayed by some, and that's one of the reasons that we want to do this forum, to explain how AIG's decisions are in the interest of maintaining the value of its businesses and repaying taxpayers.

We appreciate this opportunity, and hope that we can contribute constructively to the conversation on Daily Kos.

Peter Tulupman
AIG Media Relations

Props to AIG for going where the questions are. Just a note of caution. Language on the blogs tends to be rougher than that normally sanctioned in polite company so turn down your profanity sensitivity meter and listen to what they're really saying.

Posted without comment from the New York Times:

Mr. Kim's colleagues, not only at his level, but far down the ranks, also pocketed large paychecks. In all, Merrill handed out $5 billion to $6 billion in bonuses that year. A 20-something analyst with a base salary of $130,000 collected a bonus of $250,000. And a 30-something trader with a $180,000 salary got $5 million.

But Merrill's record earnings in 2006 -- $7.5 billion -- turned out to be a mirage. The company has since lost three times that amount, largely because the mortgage investments that supposedly had powered some of those profits plunged in value.

Unlike the earnings, however, the bonuses have not been reversed.

As regulators and shareholders sift through the rubble of the financial crisis, questions are being asked about what role lavish bonuses played in the debacle. Scrutiny over pay is intensifying as banks like Merrill prepare to dole out bonuses even after they have had to be propped up with billions of dollars of taxpayers' money. While bonuses are expected to be half of what they were a year ago, some bankers could still collect millions of dollars.

Critics say bonuses never should have been so big in the first place, because they were based on ephemeral earnings. These people contend that Wall Street's pay structure, in which bonuses are based on short-term profits, encouraged employees to act like gamblers at a casino -- and let them collect their winnings while the roulette wheel was still spinning.

"Compensation was flawed top to bottom," said Lucian A. Bebchuk, a professor at Harvard Law School and an expert on compensation. "The whole organization was responding to distorted incentives."

Even Wall Streeters concede they were dazzled by the money. To earn bigger bonuses, many traders ignored or played down the risks they took until their bonuses were paid. Their bosses often turned a blind eye because it was in their interest as well.

"That's a call that senior management or risk management should question, but of course their pay was tied to it too," said Brian Lin, a former mortgage trader at Merrill Lynch.

There's more. Go read.

Well, maybe not completely without comment. Remember that this was brought to you courtesy of the Republicans and the Reagan Revolution and the attitude that government regulations are bad. And one really has to wonder how Alan Greenspan and Hank Paulson ever thought that the economy was solid back in 2005, 2006, and 2007. And given that they did and said so, why on earth would we listen to ANY advice they have to give now?

Roger Cohen has written an ode to Pan Am and his days of travel on it. I remember flying on Pan Am myself and getting a plastic junior pilot wings pin. He goes onto to opine that perhaps the auto manufacturers should go the way of Pan Am along with some other imprecise and ill-informed maundering.

Not that the optimism of his outlook doesn't have appeal.

Churn -- of people and businesses -- has always defined America. Nobody subsidized U.S. Steel or the automaker Packard in the belief that the world without them was unthinkable.

Coming to the United States from Europe, I found this constant reinvention bracing. Look at the top 40 companies by market capitalization in Europe and most have been there for decades. Not in the United States, land of Google and eBay. Churn requires death as well as birth. The artificial preservation of the inert dampens the quest for the new.

That is true. New technology and innovation are tremendously appealing as economic fuels. But there are a few details missing from Mr. Cohen's summation and one of his commenters provides them in a heavily-reader-recommended response to Mr. Cohen's column. It is an excellent response to so many in government and media who chatter on about the automotive and manufacturing industry in the United States without real knowledge of what they are talking about.

It's all well and good to declare that the market should decide the fate of the auto companies, and that that's what keeps America dynamic, but the market, since becoming International, is not what it used to be. American manufacturers are forced to compete against countries that, for one thing, provide healthcare to their workers, instead of leaving it to the unions to fight for it. You suggest that we shouldn't go the way of European-style subsidies, but at the same time, we are being forced to compete with heavily subsidized manufacturers around the world. You blame the failure to produce the cars people want when in fact Detroit has produced precisely the cars (and trucks) that people wanted, at least until the price of gas went through the roof. Sure, there's plenty of blame to be directed at Detroit for short-sightedness and bad decisions, but this isn't only about Detroit. Our entire manufacturing base has been decimated because we are being forced to compete with countries that support their manufacturing bases, while at the same time refuse to allow us to export to them. Japanese can't buy American cars. Koreans can buy very few. Europeans do allow us to trade more freely, and General Motors as well as Ford are very successful in Europe manufacturing fuel-efficient, reliable cars. I believe the same is true for China, although I may be wrong on that one. A large part of the problem for General Motors is the cost of providing healthcare for former employees. In any civilized country, healthcare would be provided by the state, and at less of a cost.

We're all having fun beating up on the Detroit executives and the "greedy" unions and being so self-righteous about how they should be punished, but the truth is a bit more complicated. We're selling our manufacturing base, and our entire country, to the highest bidder. We give billions to banks with no questions asked. Politicians are getting rich. Oil companies are getting rich. Healthcare companies are getting rich. Workers, people who actually make things, are getting poor. That's what's killing dynamism. Where are our priorities?

-- Jim Doyle, Honolulu

When the average worker has no job, no income, no place to live, the economy comes to a halt. That's what the greedy financial types have actually been betting on. That they could get rich without creating too many of those out-of-work workers. Out-of-work workers created by sending their work overseas and with constant cuts in headcount creating the vaunted productivity increase, and for those who retained their jobs, cuts in their benefits, benefits whose loss is not underwritten by the government. Workers have been squeezed and abused and have not shared in the economic boom times. Their wages, if they have them, have stagnated, while CEOs' wages have soared and the average Wall Street worker gathers in unbelievable wealth.

In all of this boom time for business, one point has been repeatedly ignored. The worker at the bottom of the real economy is also the consumer who supposedly powers the economic engine of the country. And now we're finding out what happens when government, financial and business leaders give lip service to doing the best for the country and yet in reality have squeezed so hard that they've seriously injured their source of power, the American worker.

The Republican free market ethos that Reagan championed and Republicans since Reagan have propagated wildly without thought for consequence has finally met its end. And Bernard Madoff is the perfect symbol of the excess, the greed, the misdirection and lying that those policies have inflicted on our country. The only real question is, "How many more are there out there like him?" How many other leeches and parasites have drawn away wealth from the real economy?

So despite the "optimism" of the churn of the free market philosophy that Cohen finds so appealing, considerable resources must be spent on building back up the real engine of our economy, the workers. Their role in the equation has been reduced by all the free market proponents to that of a commodity whose price is to be minimized. Of course, when the economy relies on that same commodity to spend income that it doesn't have, it comes to a screeching halt.

The equation must be changed. A little less for the welfare kings on Wall Street and a little more for the workers on Main Street.

Peggy Noonan has written a WSJ column which she begins by noting the sense of loss and pessimism and the loss of faith in our institutions. As one woman whom she talked with put it,

"It's the age of the empty suit." Those who were supposed to be watching things, making the whole edifice run, keeping it up and operating, just somehow weren't there.

That's such an apt phrase to describe our current institutions. She goes onto to recount a conversation that she had with another friend who holds a position of some authority in Washington.

An old friend ... told me the other day, from out of nowhere, that a hard part of his job is that there's no one to talk to. I didn't understand at first. He's surrounded by people, his whole life is one long interaction. He explained that he doesn't have really thoughtful people to talk to in government, wise men, people taking the long view and going forth each day with a sense of deep time, and a sense of responsibility for the future. There's no one to go to for advice.

He senses the absence too.

It's a void that's governing us.

And that void, that predominance of empty suits has wrought a profound change in the confidence of the American people and a palpably real downturn in their lives. Depression, worry, insomnia, anger, tears. These are all part of the daily battle for so many Americans whose lives have been thrown into such turmoil by people epitomized by Bernard Madoff and the government agencies that failed to stop him.

Peggy must spend a lot of time chatting because she then reports a conversation with yet another friend about what the future holds for us.

People are angry but don't have a plan, and they'll give the incoming president unprecedented latitude and sympathy, cheering him on. I told a friend it feels like a necessary patriotic act to be supportive of him, and she said, "Oh hell, it's a necessary selfish act--I want him to do well so I survive. We all do!"

Well, Peggy, I'm glad to see that there are some Republicans who see that it's in their own self-interest to support President-Elect Obama. You might want to try passing that concept along to some Republican Senators.

And thank you, Peggy, for ending with this:

The other day I called former Secretary of State George Shultz, because he is wise and experienced and takes the long view. I asked if he thought we should be optimistic about our country's fortunes and future. "Absolutely," he said, there is "every reason to have confidence." He told me the story of Sumner Schlicter, an economics professor at Harvard 50 years ago. "He was not the most admired man in his department, but he'd make pronouncements about the economy that turned out to be right more often than his colleagues'." After Schlicter died, a friend was asked to clean out his desk, and found the start of an autobiography. "It said, I'm paraphrasing, 'I have had a good record in my comments on and expectations of the American economy, and the reason is I've always been an optimist. How did I get that way? I was brought up in the West, where the future is more important than the past, in a family of scientists and engineers forever developing new things. I could never buy into the idea that we had crossed our last frontier, because I was brought up with people crossing new frontiers.'"

Mr. Shultz laid out some particulars of his own optimism. There is "the ingenuity, the flexibility, the strengths of the national economy." The labor force: "We are so blessed with human talent and resources." And the American people themselves. "They have intelligence, integrity and honor."

We should experience "the current crisis" as "a gigantic wake-up call." We've been living beyond our means, both governmentally and personally. "We have to be willing to face up to our problems. But we have a capacity to roll up our sleeves and get down to work together."

As a household whose income is directly dependent on the automotive industry, the situation has been grim, the nights long and filled with worry. We need hope. We need more people speaking out as George Schultz and we need to recognize that we can indeed do well. That enormous challenges also provide enormous opportunities.

The Morning Reaction post by kula2316 at dkos starts off summarizing all the news about welfare applications skyrocketing around the nation and then moves onto a report of Goldman Sachs' year-end results:

Um... with all the news about welfare applications skyrocketing, more and more Americans needing food stamps or food banks, numerous states slashing their budgets, and our national debt increasing by the second, what is wrong with this picture?

Goldman Sachs Group Inc., which got $10 billion and debt guarantees from the U.S. government in October, expects to pay $14 million in taxes worldwide for 2008 compared with $6 billion in 2007.

The company's effective income tax rate dropped to 1 percent from 34.1 percent, New York-based Goldman Sachs said today in a statement. The firm reported a $2.3 billion profit for the year after paying $10.9 billion in employee compensation and benefits.

$14 million, eh? On profits of $2.3 billion? After receiving assistance from the federal government?

The rate decline looks "a little extreme," said Robert Willens, president and chief executive officer of tax and accounting advisory firm Robert Willens LLC.

"I was definitely taken aback," Willens said. "Clearly they have taken steps to ensure that a lot of their income is earned in lower-tax jurisdictions."

This is insane. The article mentions $14 million in worldwide taxes. I wonder how much of that will actually go to the government that bailed them out?

"This problem is larger than Goldman Sachs," Doggett said. "With the right hand out begging for bailout money, the left is hiding it offshore."

::::::

Oh, but I certainly hope all those Goldman Sachs execs enjoy their holiday bonuses, as The Guardian (UK) reports:

A multimillion-pound bonus pot will still be shared by workers at Goldman Sachs, which benefited from a US bank bail-out and yesterday posted its first loss since going public nine years ago.

The payout, worth around £55,000 per employee, was confirmed as the Wall Street bank blamed "extraordinarily difficult operating conditions" for a fourth-quarter loss of $2.12bn (£1.4bn). It still achieved a $2.32bn profit for the full year to November, although this was sharply lower than last year's $11.6bn.

I know there are so many things to be outraged about lately, but this really sets me off. Working and middle class Americans are losing their jobs and relying, in ever increasing numbers, on welfare or food stamps or soup kitchens. Meanwhile, Goldman Sachs takes $10 billion of taxpayer money and pays barely any taxes and then distributes its profits for bonuses. Am I missing something here or is this definitely an outrage?

What she said.

The NYT's Economic Scene blog breaks down the $73 an hour number that's tossed around so blithely by the chattering class and finds it skewed, to say the least. And who provided the number? The car companies did as part of a PR strategy used during publicity about labor negotiations.

But it is not comparing apples to oranges to use that figure when comparing the wages of non-Detroit autoworkers with those of the Big 3. This chart lays out the basics but the article is even more enlightening. Go read.

President-Elect Obama announces the biggest investment in our country's national infrastructure since the federal highway system was built.

SusanG at dkos pointed out one oratorical detail that's a small but powerful one.

Aside from the commitment to what sounds like a great progressive stimulus plan, one sentence struck me: Will your job or your husband's job or your daughter's job be the next one cut?. Read that closely. In a speech about universal fears and hardship, he is addressing his primary listeners as women. Never have I heard sentence construction like that from a president -- women addressed directly in a non-"women's issues" setting as legitimate, fully fledged and very concerned and invested breadwinners. The effect is stunning.

I haven't heard it either, Susan. Add it to another one of Obama's many strong points as an orator.

The complete transcript of the address is on the flip side.

The GAO report (pdf) on management of the bailout released on Tuesday follows an oh-so-familiar pattern evident in the litany of failures of the Bush administration that begins with Katrina, the management of the Iraqi occupation, the DOJ politicization, and goes on and on.

TPMMuckraker, specifically Zachary Roth, has been doing an excellent job of tracking through the report and reaction to its contents. Zach made three posts in a row whose content is guaranteed to make any US taxpayer nervous if not outright sick and angry.

His first was from "page 15 of the GAO report on how Treasury is spending the bailout money":

[Treasury's Office of Financial Stability] has not yet determined if it will impose reporting requirements on the participating financial institutions that could enable OFS to monitor, to some extent, how the financial institutions are using capital infusions.

In other words, Treasury may not force banks even to tell the department how the banks using the billions of dollars they're getting. It's a no-strings-attached deal, it would seem.

Next, he notes the report's comment on oversight:

The GAO report makes clear that the urgency of the crisis has meant that oversight procedures have taken a backseat. It concludes in part:

Treasury has not yet set up policies and procedures to help ensure that [Capital Purchase Program] funds are being used as intended.

And then, this one which makes one want to weep with frustration:

Here's a bit more detail, from page 25 of the GAO report, on what seems like the Treasury's utter aversion to requiring banks to offer any information whatsoever on what they're doing with the billions of dollars of taxpayer money they're getting.

[I]t is unclear how OFS and the banking regulators will monitor how participating institutions are using the capital investments and whether these goals are being met. The standard agreement between Treasury and the participating institutions does not require that these institutions track or report how they plan to use, or do use, their capital investments.

...
With the exception of two institutions, institution officials noted that money is fungible and that they did not intend to track or report CPP capital separately.

...

The banking regulators indicated that they had not yet developed any additional supervisory steps, such as requiring more frequent provision of certain call report data for participating institutions, to monitor participating institutions' activities.

So it seems to come down to this: the banks won't say what they're doing with the money, and Treasury is too polite to ask.

Too polite? There are other words for this breach of the public trust by the Treasury Department officials. Incompetent seems mildest of them.

There's more in the report. On limiting outrageous executive compensation, Zach noted that "Treasury officials aren't even on the same page with each other about how to enforce the limits -- and some think it can be left to the banks, fox-henhouse concerns be damned."

Conflict of interest issues have surfaced as well:

The GAO report sheds light on another interesting angle to the conflict of interest problem with Treasury's administering of the bailout.

The department has hired outside private contractors to administer parts of the bailout program, notes GAO. Given the reports we've seen about Treasury lacking staff -- and lacking the right staff -- to implement the program, that may be a good move.

But as the report explains, outside contractors aren't subject to the conflict of interest rules that govern Treasury staff. As a result, Treasury asked the contractors to identify potential conflicts. There were many.

Zach goes on to quote a few of the relevant issues and conflicts and it's bad. It essentially says that the contractors hired have said there are conflicts, that some of their clients are entities that will be receiving TARP money, and yet the Treasury people have essentially said 'we trust you'll do the right thing'.

Finally TPMMuckraker reports that Pelosi and Frank had similar negative reactions to the report.

In a statement, Speaker Nancy Pelosi said:

The GAO's discouraging report makes clear that the Treasury Department's implementation of the (rescue plan) is insufficiently transparent and is not accountable to American taxpayers."

And Rep. Barney Frank, who chairs the House Financial Services Committee, agreed, saying in his own statement:

The American people received two kinds of news about the TARP program - bad and worse news.

The bad news was confirmation by the GAO in its first report about the program that Treasury has no way to measure whether taxpayer funds invested in banks are being used in accordance with the purpose of the law - to increase lending. The much worse news is Treasury's response that it does not even have the intention of doing so.

Frank added: "A public hearing on the issues raised by the GAO report is now essential."

Combine that with the willful obstruction of bailout oversight by a Republican senator, likely Jim Bunning of Kentucky, and one must conclude that Republicans want to destroy the US economy and its citizens.

The old truth "By their fruit, ye shall know them" is most germane. Based on their actions, Republicans sure as hell aren't interested in any form of responsible government and no amount of words can conceal that fact.

Obama announced a special economic recovery advisory board which will be chaired by Paul Volcker (NYT bio). It will meet for 2 years and its renewal for another term considered at the 2 year point. Austan Goolsbee (NYT bio) will serve as the staff director as well as one of Obama's 3 economic advisors on the Council of Economic Advisors. Per Obama,

This board is modeled on the President's Foreign Intelligence Advisory Board created by President Eisenhower to provide rigorous analysis and vigorous oversight to our intelligence community by individuals outside of government -- individuals who would be candid and unsparing in their assessment. This new board will perform a similar function for my administration as we formulate our economic policy.

So what's the difference between the National Economic Council which is the group that Larry Summers (NYT bio) will head up and the President's Council of Economic Advisers which UC-Berkeley professor Christina Romer (NYT bio) will head?

Per this NPR report the Council of Economic Advisors was created by legislative decree in 1946 and it's a small group of experts who advise the president on economic policy -- a small White House think tank. The National Economic Council was created by executive order shortly after Clinton took office and its purpose is to bring together agency and department heads to coordinate economic policy, somewhat like the National Security Council.

On Tuesday, Obama introduced his picks to head up the Office of Management and Budget. Peter Orszag (NYT bio) will be director of OMB and Robert Nabors, the deputy director of OMB. [transcript]

Obama made it clear that their commission is to review the budget line-by-line and come up with a smarter budget with programs that address today's needs.

This isn't about big government or small government. It's about building a smarter government that focuses on what works. And that's why I will ask my team to think anew and act anew to meet our new challenges.

On Monday Obama introduced his economic team and it was a crowd of heavy hitters. The video of his announcement and the press Q&A session that followed along with a transcript are here.

On stage with Obama was Tim Geithner (NYT bio), his nominee for Treasury Secretary, Larry Summers (NYT bio) to head up the National Economic Council, Christine Romers (NYT bio) to lead the Council of Economic Advisors, and Melody Barnes (NYT bio) as director of the Domestic Policy Council. During the week the Obama team also announced Heather Higginbottom as deputy director of the Domestic Policy Council. I had a little bit of contact with Heather when I worked on the Kerry website in 2006-2007 and she was Sen. Kerry's Legislative Director.

Comments from President-Elect Obama during his third press conference highlighted how he's approaching the formation of his team and the chatter about the Clinton administration alums present in in his selections.

I suspect that you would be troubled and the American people would be troubled if I selected a Treasury secretary or a chairman of the National Economic Council at one of the most critical economic times in our history who had no experience in government whatsoever.

What we are going to do is combine experience with fresh thinking. But understand where the -- the vision for change comes from first and foremost. It comes from me. That's my job, is to provide a vision in terms of where we are going and to make sure, then, that my team is implementing it.

Obama's management of the 3 days before Thanksgiving and retail's traditional "Black Friday" sales events was reassuring. The amount of work that's already occurred which allowed him to stand up and assure the American people that his administration "hit the ground running." From Tuesday's press conference:

Given the extraordinary circumstances that we find ourselves in, however, I think it is very important for the American people to understand that we are putting together a first-class team and for them to have clarity that we don't intend to stumble into the next administration. We are going to hit the ground running. We're going to have clear plans of action. We intend to have the kind of economic recovery plan that is going to put 2.5 million people into jobs. We are going to make sure that we start focusing on energy, on health care, on revamping our education system so that it's competitive in the 21st century, and as I'm talking about today, that we are not going to back to business as usual when it comes to our budget.

When the 3 press conferences and the Q&A sessions are taken as a whole, they reveal a well-thought out plan for addressing the leadership issue during a most unusual time of transition. It's reassuring to see though there's still much turbulence to be navigated. And I know I'm in good company when Paul Krugman is pleased that "the grownups are coming" and Nouriel Roubini says, "The choices are excellent."

Headlining President-Elect Obama's third consecutive day of economic team rollout is Paul Volcker. Per the WSJ:

President-elect Barack Obama will appoint former Federal Reserve Chairman Paul Volcker on Wednesday to be the chairman of a new White House advisory board tasked with helping to lift the nation from recession and stabilize financial markets, Democratic officials say. [...]

The board's mission won't be to supplant the policy-making role of the Treasury Department and other agencies, but to give Mr. Obama an official forum for getting expert advice outside the normal bureaucratic channels. It will give briefings to the president.

The panel, called the President's Economic Recovery Advisory Board, is modeled on the Foreign Intelligence Advisory Board established by then-President Dwight Eisenhower in 1956, at the height of the Cold War, when officials worried that that the existing bureaucratic structure was inadequate to help the U.S. keep pace with the Soviet threat. The financial crisis has drawn similar worries that the government isn't properly organized to monitor and respond to modern financial markets. [...]

The board's tasks will be broad: to help design and implement short-term programs to jump-start the economy, raise wages and living standards and confront the housing crisis. It will also address the delicate task of bolstering Washington's oversight of the financial markets in the wake of a Wall Street collapse that has taken down many of its most venerable institutions.

I'm glad to see that Obama is going reap the benefit of Mr. Volcker's knowledge and leadership. This combined with the two prior economic team announcements puts out the notice that the Obama administration is organized and ready to go in a transition that is already remarkable in many ways. [via]

Barry Ritholz has found a way to bring a little reality to just how big the bailout may be. He notes that the current total cost, including the Citi bailout, "now exceeds $4.6165 trillion dollars".

People have a hard time conceptualizing very large numbers, so let's give this some context. The current Credit Crisis bailout is now the largest outlay In American history. Jim Bianco of Bianco Research crunched the inflation adjusted numbers. The bailout has cost more than all of these big budget government expenditures - combined:

• Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
• Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
• Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
• S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
• Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
• The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
• Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
• Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
• NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

TOTAL: $3.92 trillion

Just look at all the items added up and know that their sum is less than the current fiasco. That's a big number. [via]

Here's another way to look at what's in the bailout, courtesy of the New York Times.

Click on image for larger graphic.

President-Elect Obama introduced his economic team at noon today in Chicago and then took questions from the press. The first clip is his statement on the economic plans that they are developing for the nation. The second clip is the press Q&A portion. Staff bios and transcript of Obama's comments courtesy of Ben Smith.

And if you haven't seen it yet, here's President-Elect Obama's 11-22 Saturday address which also addresses the economic crisis:

NBBooks wrote this comment in a recent dkos diary. It deserves a little more attention than just that of a throw-away comment.

I was covering and writing about deregulation and financial derivatives back when one of the very few Congressmen to oppose the deregulation of the savings and loans, Texas Democrat Henry Gonzales was chairman of the House Banking Committee (read Molly Ivins' November 2000 obituary of Gonzalez here) and Richard Breeden was chairman of the SEC. Many of you probably know the general outline of the history of these issues the past 30 years. But in the late 80s to mid-90s, I was in some of the hearings where these ideas were debated in the Congress, in the SEC and CFTC and in some of the think tanks back in the late 1980s and early 1990s. I saw how Wall Street got its way over and over and over again.

For me, opposing Wall Street came down to one central idea - it's the real economy that's important, and the banking and financial system should always be kept in a position of subservience to it. It's the real economy that produces and distributes the food we eat, the clothes we wear, the houses we live in, the cars and buses and trains and planes we ride in. The real economy provides what people need to survive; by contrast, you can't eat a debenture or a bond. And in the 1980s, the real economy, as I saw it, was being sacrificed to and looted by the banking and financial system.

Does anyone remember "It doesn't matter whether we produce potato chips or computer chips" ? I was among the Cassandras that were shouted down when we tried to warn such foolishness would bankrupt our country. Yeah, too damn bad we had to wait twenty years to show you the proof.

The financial catastrophe that has occurred under George W. Bush is only the logical result of the "post industrial" policy trends of the past three decades, but some people still don't get it. I find it hard to believe there are people, so called "progessives," here - here of all places! - that are in favor of allowing the auto industry and at least one million working class jobs to disappear.

No one I have seen yet has challenged the estimates that a million jobs would be lost to begin with. Some estimates go as high as three million jobs lost. It will take years, and millions of lives lost to despair, hopelessness, misery, and the amplified affects of deteriorating mental and physical health, before we would climb out of this disaster.

Yet, many people appear anxious to pay this extravagant price. To punish auto's management for making bad decisions. To punish industrial workers for abandoning the Democrats and supporting Reagan and both Bushes. To punish organized labor for making more money than they do.

To punish mankind for having the arrogance to tame and harness nature so that ninety percent of kids no longer die before they're five years old.

What stupidity. What short-sighted, unthinking, vengeful moronbasity.

Well, people who have had their heads up their ass for the past twenty years, are about to have their asses handed to them. Too bad the innocent are going to get the same treatment.

I left my journalistic position in 1996, feeling very tired, belittled, jaded, cynical, and completely marginalized.  Meanwhile Wall Street led the country on a tear of false prosperity that my fellow Americans can now see was nothing but debt, debt, debt, piled on more debt. This is my "I told you so," moment, but what effing good does it do?

What I can do that might do some good is to tell you what I think is coming next.  

The Obama administration will spend around 12 to 24 months try to find a solution to the new world depression within the confines of neo-liberal economic thought.

Meanwhile the suffering and misery is going to get worse, and worse, and worse. The Rethugs will be grinning from ear to ear.

I'm hoping the street organizer in Obama will come to the fore at that point, and we can begin to crack down on the financial markets and their addiction to hot money. In other words, saving the real economy is going to require destroying all the offshore tax havens and imposing a tax on financial transactions that chases out short-term speculation.

Basically, we are either going to force the financial system to eat the losses of its deflated bubbles, or the financial system is going to force us to cut wages, pensions, Social Security, national healthcare and the standard of living.

Most people, including Obama I fear, don't understand this yet. We are going to waste a year or two floundering about trying to avoid both massive economic pain and panicking the markets, before we finally figure out it is impossible to do both.

I hope that his conclusion about Obama's team is not true but his point about the auto-makers and the real economy is very important. As he put it, there is a huge difference between potato chips and computer chips, and the loss of potentially 3 million jobs related to the auto industry is not an acceptable option. Once people understand that, this should no longer be a discussion about the foolishness of auto-industry CEOs but a focus on rebuilding the real economy in the US.