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A New Way Forward
March 17, 2009 9:17 AM   Subscribe

Nationalize. Reorganize. Decentralize. anewwayforward.org wants you to organize a protest on April 11th to express your frustration and disapproval with how our elected officials have handled the economic crisis.
posted by geos (62 comments total) 3 users marked this as a favorite

 
I thought we just did this last November?
posted by Big_B at 9:23 AM on March 17, 2009 [3 favorites]


Our elected officials have failed us when they failed to commence impeachment against Bush and Cheney. Our problem is systemic and essentially started when W opted to be loyal to his handlers and ignore the people of the US of A.

Give the current administration some time to work out the problems. They are legion and will take some hard work and effort to change course. After all it took 8 years and a couple of wars and a few trillion dollars to get us here.
posted by malter51 at 9:24 AM on March 17, 2009


A party on my birthday? You shouldn't have!
posted by poppo at 9:26 AM on March 17, 2009


We're protesting your getting older. Don't do it!
posted by Dr-Baa at 9:29 AM on March 17, 2009


What Big_B and malter51 said.
posted by Guy_Inamonkeysuit at 9:30 AM on March 17, 2009


I'm really surprised that there hasn't been more of a call to limit the size of banks and financial institutions.

I think that my first reaction to hearing that some institution or another was too big to fail was: "Well, why the hell did we let it get that big?" And yet, one of the reactions to all of the bank failures and bailouts was to use the bailout money to make the bigger banks even bigger. It's madness.
posted by jefeweiss at 9:31 AM on March 17, 2009 [3 favorites]


A politician's ability to change things relies on their political power which in turn is expressed by the people. A demonstration can refresh a mandate, so to speak, especially a mandate semi-diluted by being "about" many different topics.
posted by DU at 9:32 AM on March 17, 2009


Sponsored by who, exactly?
posted by boo_radley at 9:33 AM on March 17, 2009


Really? Obama has been on the job for two months? How about we give him some time. Historically, recessions take years to get out of, not months.

Funny how there's this double standard with Democrats. Considering all the leeway Bush got for his obviously screwed up policies its incredible how little is given to Obama.
posted by damn dirty ape at 9:34 AM on March 17, 2009 [4 favorites]


Also, I thought it was pretty unconscionable that $5 billion of taxpayer money that was paid to AIG went to UBS, which has been in the news lately for helping wealthy Americans to avoid paying taxes.
posted by jefeweiss at 9:37 AM on March 17, 2009 [1 favorite]


Give the current administration some time to work out the problems. They are legion and will take some hard work and effort to change course. After all it took 8 years and a couple of wars and a few trillion dollars to get us here.


Obama is in office, but is he in power?
posted by Zambrano at 9:38 AM on March 17, 2009


Meh. Isn't there a Facebook petition I can just "sign"?
posted by Hovercraft Eel at 9:39 AM on March 17, 2009


Barack Obama has not ended the recession or solved the economic crisis or come up with a solution for global warming and it's 56 days into his presidency! Good night America! Call out the Marines! Get Lou Dobbs to wear a sandwich board and scream into a megaphone in Times Square!
posted by blucevalo at 9:43 AM on March 17, 2009


@jefeweiss:

United States antitrust law: History of anti-trust (Wikipedia)

"The antitrust laws comprise what the Supreme Court calls a "charter of freedom", designed to protect the core republican values regarding free enterprise in America. One view of the statutory purpose, urged for example by Justice Douglas, was that the goal was not only to protect consumers, but at least as importantly to prohibit the use of power to control the marketplace."
posted by tapesonthefloor at 9:50 AM on March 17, 2009 [1 favorite]


So to solve the AIG bonus problem, we're going to give AIG more money, equal to the amount of the bonus, so they can give us back that additional money, and tell us that that's the bonus money.

Yeah, maybe it is time to march.
posted by orthogonality at 9:50 AM on March 17, 2009


I agree with DU, holding a public demonstration is a good way bring this particular issue and point of view to the government's attention. The idea is that if you get enough voters to show up it's hard to ignore. OK, it's still pretty easy to ignore.
posted by waxboy at 10:08 AM on March 17, 2009


I prefer to protest by shaking my fist at the sky.
posted by diogenes at 10:10 AM on March 17, 2009


Oh, so it's Metafilter that is your personal army.
posted by Pope Guilty at 10:13 AM on March 17, 2009 [1 favorite]


Apparently the AIG bonuses have already been paid. The news wasn't that the bonuses would be paid but that they had been paid. The checks were already written. And it turns out that the administration had known about it for months, but didn't seem to care too much until the populist outrage ramped up, in fact bloomberg actually reported on the bonuses in January.
Really? Obama has been on the job for two months? How about we give him some time. Historically, recessions take years to get out of, not months.

Funny how there's this double standard with Democrats. Considering all the leeway Bush got for his obviously screwed up policies its incredible how little is given to Obama.
Okay, look. The problem isn't that he hasn't "fixed" things, the problem is that he's forking over hundreds of billion dollars to these privately-held, for-profit companies, for them to do whatever the hell they want with the money. AIG is a special case because it is actually majority owned by the government (in other words, it actually was nationalized). Yet, even at the company we did nationalize they still are paying these absurd bonuses.

But the AIG bonuses are just a minor issue in the ongoing scandal of all this money flowing into the pockets of the bond holders and counter parties of these huge financial institutions. Goldman Sachs got 12.9 billion from AIG paying out on its derivative contracts. That's money that's flowed directly from the FED to Goldman without any concessions on Goldman's part. (Actually, this is posted collateral, but still)

The problem isn't he hasn't "fixed it" yet, but the fact that they are taking steps that can't actually be undone.

Also I don't remember anyone around here giving bush any leeway. What are you talking about?
posted by delmoi at 10:19 AM on March 17, 2009


Well, damn dirty ape, if you think that the "solution" is to get things generally running in the same way they were before. If you think "growth" is what we need. If you think that these are the goals we should be striving for. If you think that keeping the same institutions intact as much as possible, with maybe some moderate adjustments here and there... well... sure, give him some time.

But if, like me, you feel the "solution" requires a lot more "change" than we're seeing, if you think we need to flush the slime out, if you think we need to stand up against the corporate greed, if you think the people running the joint now shouldn't be the same people who ran the joint in the past 10-20 years... well... then the time we're giving him isn't gonna be enough.

To some of us, his promises of civil liberties and such are definitely being trampled in the name of corporate America. And every damn time I *think* I can trust a Dem as president, they go and reaffirm what I've always said I believe. The rot goes much deeper, and it needs to be torn apart from the bottom up. Electing one corporate pushover over another isn't doing jack shit for us.

So good on people for trying to shake things up a bit.
posted by symbioid at 10:23 AM on March 17, 2009


Also, the Obama administration may eventually get this right, but that doesn't mean we should ignore things that we see as problems. For one thing, the Obama administration actually responds to this kind of pressure. They responded to the populist outrage about Tom Dashel, and before that they responded to criticisms from from people opposed to torture about John Brennan being made the CIA director. Recently, they've reacted more strongly about the AIG bonus fiasco after the populist outrage bubbled up.

So the fact is, not only is it important to keep the pressure up, with the Obama administration so far it works. Simply ignoring things we think are problematic in hopes that Obama is just so smart and awesome that he'll correct the problems without any pressure is absurd.
posted by delmoi at 10:25 AM on March 17, 2009 [2 favorites]


Oh, wow, someone has a website.
posted by nanojath at 10:37 AM on March 17, 2009


I will say that I'm generally suspicious of the motives of these types of sites, and have a feeling they're the same people who call Obama a "socialist"...
posted by symbioid at 10:44 AM on March 17, 2009


The first three links propose radically different (and incompatible) solutions to the problem. It seems that "anewwayforward" should be called "anywayforward."

I find the complaints about the Obama administration doing the "wrong" thing are significantly weakened by the fact that no two of his critics seem to agree what the "right" thing is. If there is some obvious path "forward" out of this mess, it hasn't yet become sufficiently obvious for any large coherent movement to coalesce around it.
posted by yoink at 10:44 AM on March 17, 2009


You know, such protests & strikes are exactly what Obama needs now because they let him play "good cop" while the protestors play "bad cop".
posted by jeffburdges at 10:46 AM on March 17, 2009


I like this and support it (heck, I became a "fan" on Facebook, so my vote is cast), but not because I want to express ... frustration and disapproval with how our elected officials have handled the economic crisis.. I just think the basic plan (nationalize, reorganize, decentralize) is probably our best way forward and the more people we can get behind it the better.
posted by wemayfreeze at 10:48 AM on March 17, 2009


yoink, are you judging the protest because of the links in this post?
posted by wemayfreeze at 10:50 AM on March 17, 2009


Why Was AIG's Stock Up 66% Today?
posted by jonp72 at 10:50 AM on March 17, 2009 [2 favorites]


yoink, are you judging the protest because of the links in this post?

The links in the post are taken from the website organizing the protest (scroll down on the newwayforward site). They present arguments by people who do not agree with each other as to the best solution to this crisis. If the Obama administration adopted any one of these three proposals, would we get a website that linked to the two others plus someone advocating the "Tim Geithner plan"?

I'm suggesting that a protest organized on three mutually incompatible planks smacks more of angry panic than it does of a reasoned rejection of the administration's policy.
posted by yoink at 10:57 AM on March 17, 2009


I'm not angry that Obama hasn't fixed the economy in two months. I'm fucking livid that AIG took my money (and yours) and gave $1M "retention" bonuses to eleven people who then left AIG. For one example.

Government: We don't want you to pay these bonuses.
AIG: Yeah I understand where you're coming from, but gonna do it anyway.
Government: Eh, ok.
posted by danny the boy at 11:01 AM on March 17, 2009 [1 favorite]


In this case, I'm fairly certain Obama has been playing a game to string along the big banks and private financial institutions. Siezing the banks is almost a guaranteed next step, and now AIG has handed him the cassus belli for a war on Wallstreet. On a silver platter.

In the end, it's going to be very expensive, a few hundred billion at the least, to fix the banking industry... but not trillions. Most of the "trillions" will be recovered in short order as the government siezes, strips down to the ground and then rebuilds these institutions.

However, this will takes years, not months. If you're looking for a job, get your CPA cert and head to DC - they're going to need a few thousand of you. For AIG alone.
posted by Slap*Happy at 11:03 AM on March 17, 2009


I'm all for immediate action. Now. What should we wear?
posted by Postroad at 11:10 AM on March 17, 2009


Green!
posted by waxboy at 11:24 AM on March 17, 2009


yoink, word. I hadn't seen those links; thanks for the clarification.

The first article is smart because it is Krugman and he is smart. Go Krugman.

The second two articles are weird in different ways, and neither is sufficient as an argument for the protest. The "reorganize" link is so vague in its subject (a "powerful interest group" of bankers and politicians that must be broken up) as to be meaningless. And the "decentralize" link is mostly dumb populist rhetoric (why aren't the banks taking the money and lending it to us! the nerve!).

That said, they both do forward the basic positions that the protest supports: we don't need to deal just with the technical financial issues, we need to deal with the power brokers (bankers, politicians, appointees) who got us here; and if a bank is too big to fail it is too big to exist.

I agree with them. I wish they had better links.
posted by wemayfreeze at 11:27 AM on March 17, 2009


I'm all for immediate action. Now. What should we wear?

I think we should combine the best of left-wing protests and the best of right-wing protests, so stilts, giant paper mache heads, and poop hats.
posted by dirigibleman at 11:28 AM on March 17, 2009


I will say that I'm generally suspicious of the motives of these types of sites, and have a feeling they're the same people who call Obama a "socialist"...
If there's one thing anti-socialists love, it's nationalizing banks. Also do you have any idea who those people are? Paul Krugman's problem with Obama is that he isn't socialist enough. He's been talking about how Europe's social safety nets provide a buffer against this economic crisis (but complaining that Europe isn't doing a big enough stimulus)
In this case, I'm fairly certain Obama has been playing a game to string along the big banks and private financial institutions. Siezing the banks is almost a guaranteed next step, and now AIG has handed him the cassus belli for a war on Wallstreet. On a silver platter.
Ah the old "I don't like what a politician is doing, so I'm just going to assume they are secretly planning to do what I want, and are just waiting for the right moment" argument. Yeah, that's not a very good one. It seems like they haven't taken nationalization off the table, but it's something they've said again and again that they are deeply opposed and

And how can this AIG B.S. be a cassus belli for nationalization when was already nationalized, by the bush administration! Its a symbolic thing and it has nothing to do with anything.

The links in the post are taken from the website organizing the protest (scroll down on the newwayforward site). They present arguments by people who do not agree with each other as to the best solution to this crisis.

How are they incomparable with each other? First you nationalize the banks (nationalization), then you reorganize them (reorganization). and finally you could sell the pieces back to private hands, while putting regulations in place that keep them decentralized.

Paul Krugman and Simon Johnson may disagree about some things but they are certainly both for nationalization, they are both on the same page. I have no idea who the third guy is, anyone can post a diary on Open Left, I assume.

Also, not only is reorganization compatible with nationalization reorganization requires nationalization as a first step. And it seems like decentralization would require some kind of reorganization as well.
posted by delmoi at 11:28 AM on March 17, 2009



The first article is smart because it is Krugman and he is smart. Go Krugman.

The second two articles are weird in different ways, and neither is sufficient as an argument for the protest. The "reorganize" link is so vague in its subject (a "powerful interest group" of bankers and politicians that must be broken up) as to be meaningless.


Well, Krugman has linked to Simon Johnson as well (I don't know how many times). Johnson is an IMF guy who has dealt with crises in other countries and has been making the point that you always see an entrenched set of elites (which he calls an oligarchy) who caused the problem try to cling to power, and that an economic recovery is often dependent on whether or not those people are able to keep power. He's been making the point that what he's seeing in the U.S. is similar to what he's seen in emerging economies grappling with economic crises, and it's not good.

here's a post where Krugman sites Johnson, and Here is a post where Krugman calls Johnson's blog the baseline scenario a "must read".
posted by delmoi at 11:35 AM on March 17, 2009


THE POLITICS OF FAILURE HAVE FAILED!!! WE MUST MAKE THEM WORK AGAIN!!!
posted by blue_beetle at 11:37 AM on March 17, 2009


Thanks for the background info, delmoi. I'm still annoyed that the anewwayforward folks are using the Johnson piece as evidence when it is so vague, but I'm glad that he's on the level.
posted by wemayfreeze at 12:05 PM on March 17, 2009


How are they incomparable with each other?

Delmoi, follow Johnson's "if implemented right" link from the linked article. He is firmly opposed to nationalization. I trust I needn't spell out how a plan to nationalize the banks and a plan to avoid nationalizing the banks are "incompatible" ;-).
posted by yoink at 12:08 PM on March 17, 2009


Let's be clear: Johnson thinks nationalization is a bad idea (link); Krugman thinks it's necessary (link). But Johnson supports anewwayforward's point that key to moving forward is reorganizing the banks to remove people who had a vested interested in the way things were and that worked to dig this hole we're in.

Though the two sides have some ideas that are incompatible, they also have ideas that can work together.
posted by wemayfreeze at 12:29 PM on March 17, 2009


Also, Johnson (and his homeboy Kwak) think that nationalize v. not isn't the most critical distinction. Rather it's do something drastic v. not ("not" being what Obama is doing). This is a good link.
posted by wemayfreeze at 12:53 PM on March 17, 2009


Though the two sides have some ideas that are incompatible, they also have ideas that can work together.

Well, sure. But then they also have ideas that work together with the Obama administration's. This is what I mean about the incoherence of this as a "movement." It's easy to get people riled up when the economy's in the shitter and everyone's scared, but there's something a bit odd about the strange bedfellows this creates. I hear lefties decrying the support for mortgages alongside asshole brokers who are cheering Rick Santelli; I hear uber-toad Jonah Goldberg saying that Summers is right that we are a nation of laws and the AIG bonuses are untouchable and right-wing Republican senators denouncing them as a scandal. None of this amounts to a coherent "alternative proposal" to what is currently on the table--it's all just accumulated fear and anger (and preexisting political biases) building up and looking for a conductor through which to discharge. It's a scary time, frankly; I could as easily see a populist right-wing nationalism emerging as the loudest voice in the throng as any kind of 'socialist' one. The vagueness of a movement like "newwayforward"--when it isn't actually proposing a "way" at all--seems to me symptomatic of that disquieting instability.
posted by yoink at 12:58 PM on March 17, 2009 [1 favorite]


Delmoi, follow Johnson's "if implemented right" link from the linked article. He is firmly opposed to nationalization.

Is he? I'm looking around and I don't see anything where he specifically says he's against nationalization, followed by reprivitization, which is what most people seem to want. Here's a relevant blog post:
For the United States. We’ve debated this week what to do about U.S. banks, arguing about which unappealing options are less bad. In my view, the choice is not “nationalize vs. don’t nationalize,” but rather “keep our current partial nationalization/bottomless pit subsidy system vs. start down the road to reprivatization.
I think what people want here is to take over the banks, and then have the U.S. government sell off the pieces, just as they do when the FDIC takes over a bank. No one is arguing that the U.S. government should take over the banks and run them directly for a long period of time.
posted by delmoi at 1:05 PM on March 17, 2009


I hear uber-toad Jonah Goldberg saying that Summers is right that we are a nation of laws and the AIG bonuses are untouchable and right-wing Republican senators denouncing them as a scandal.

Grasseley actually said the executives at AIG should commit seppuku and kill themselves. His staff then issued a clarifying comment.
posted by delmoi at 1:09 PM on March 17, 2009 [1 favorite]


Johnson comes out explicitly against nationalization in this post.
If you hid the name of the country and just showed them the numbers, there is no doubt what old IMF hands would say when confronted by the current situation of the United States: nationalize the banking system.… As soon as you reveal that the country in question is the United States, the advice has to change…
posted by wemayfreeze at 1:16 PM on March 17, 2009


Delmoi, here's the post where he explicitly argues against nationalization for US banks.

I love the Grasseley apology: "of course, when I said 'go kill yourself' I meant 'repent, and sin no more'--a mere slip of the tongue!"
posted by yoink at 1:20 PM on March 17, 2009


personally? I think the whole AIG thing, while being a serious breech of trust, is pretty small potatoes at this point (about .1% of the money already given to AIG). I've no beef with Congress' plan to tax the hell out of those bonuses, but as well I think all this OUTRAGE is a bit overblown. Suddenly NOW all members of congress are positively climaxing all over themselves about the possibility of having a tangible scapegoat (Grassley: AIG execs should give back the money then resign or kill themselves), when the problems persist and will most likely need more money in the future. Most of AIG's top management has already been replaced, these bonuses where already written into contracts prior to new management. If AIG didn't pay the bonuses they would have been sued and likely have spent MORE money in defending against the suits then they would have in just paying the bonuses.

So, yeah short version: More power to congress in getting this money back, but spare me the outrage porn.
posted by edgeways at 1:21 PM on March 17, 2009 [2 favorites]


yoink, sure, the clamor of voices crying out doesn't amount to a coherent movement or plan, but I don't think that's true of the protests we're talking about. Okay, their rhetoric is a bit thin and their links could use some depth, but the basic sketch—nationalize, reorganize, decentralize—is about as coherent a plan as you're going to find.
posted by wemayfreeze at 1:21 PM on March 17, 2009


So, yeah short version: More power to congress in getting this money back, but spare me the outrage porn.

Outrage porn is what congress does. I don't think they do anything else, actually.
posted by delmoi at 2:54 PM on March 17, 2009


"If AIG didn't pay the bonuses they would have been sued and likely have spent MORE money in defending against the suits then they would have in just paying the bonuses."

So, union labor can renegotiate contracts after the fact, so that the company doesn't die (as with Ford/GM), but highly paid derivatives traders at an insolvent company can't? We dump all that outrage on union workers, and these overpaid finance workers can't sacrifice anything or they'll sue?
posted by krinklyfig at 3:54 PM on March 17, 2009


So, union labor can renegotiate contracts after the fact, so that the company doesn't die (as with Ford/GM), but highly paid derivatives traders at an insolvent company can't?

Well, union laborers have good reason to care if the company goes bankrupt, so there's leverage. If you just blew up the world's economy, you probably want to take your multi-million dollar bonus and run.
posted by yoink at 4:57 PM on March 17, 2009 [1 favorite]


Will an ineffective response to the banking crisis sink Obama's Presidency? Matt Yglesias and Matt Welch discuss.
posted by delmoi at 5:26 PM on March 17, 2009


I wonder who designed anewwayforward.org. Presumably their given name is not A Happy DreamHost Customer.
posted by limeonaire at 7:22 PM on March 17, 2009


I've actually had this exact idea in my head for a few days now, but I personally pictured people carrying pitchforks and torches down to wall street, congress and branches of the large banks across the country... Fake torches and pitchforks, of course... Fake. We wouldn't want anyone to actually get hurt, just make a very strong statement. It is time for witchhunts, I mean that seriously. This situation has gone too far. The people who created this situation should be shaking in their boots.
posted by PigAlien at 9:25 PM on March 17, 2009


Remember that scene in Blazing Saddles where Cleavon Little is holding a revolver to his own head pretending to be his own kidnapper, and the townspeople back away saying "Hold it men, he's not bluffing"?

The AIG situation is a bit like that, I think. Heck, it's a lot like that.
posted by clevershark at 9:50 PM on March 17, 2009 [2 favorites]


Also (and this is still tangentially in topic) am I the only one who gets the impression that Goldman-Sachs got TARP funds for a set of securities, and then turned around and got AIG to also pay them for the same set of securities by "converting" swaps?
posted by clevershark at 9:54 PM on March 17, 2009


The middle classes are revolting! (via)
There is a growing number of protests events in virtually every area of the world, where primarily middle class anger is being vented at ruling governments for not doing enough (or for doing too much), and also aimed at what can only be identified as the non-government upper class. These are not protests about civil rights or even a religious view; these are protests of one class against another. Where does it go?

[...]

This is a photo of a protest of some 100,000 people who marched on Dublin on February 21, 2009, “to vent their anger at the Irish government’s handling of the country’s recession”, according to the BBC coverage. The march was organized by the Irish Congress of Trade Unions, and the primary focus was a prospective salary cut for 350,000 public sector employees as a way to reduce government spending.

However, news and videos I’ve seen about the event make me wonder if what motivated these people was more a mood than an issue - the mood summarized by one unidentified protestor in the BBC coverage: “I’ve worked all my life, I’ve never broke the law, never walked out on strike. Instead I’ve went (sic) to work and done my job,” he said. “I’ve a mortgage to pay, I’ve children to put through school, and now I’m being told I have to take cutback, after cutback, after cutback.”

The alarming thing to me is that these are the concerns of the middle class. I do not remember protests by the middle class, especially protests that appear to be motivated more by frustration and anger than anything else in particular...
maybe this belongs in the inequality thread? anyway i thought this was apropos:
Stabilization programs in emerging markets often come down to this: the government needs to do something unpopular, e.g., reduce some subsidies, privatize an industry, or eliminate the crazy credit that goes to oligarchs - no one likes oligarchs, but their factories employ a lot of people. There is naturally resistance - pushback from legislators, riots in the streets, or oligarchs calling their friends in the US foreign policy establishment. The question becomes: does the government have the “political will” to get the job done?

[...]

It is striking that Ben Bernanke now asks whether the United States today has sufficient political will. How did we get to the point... You can point the finger at Congress. The parliamentary system in Britain and Germany means that the government can implement and innovate a bailout policy without worrying about being able to legislate enough financial support. The Obama Administration has much to worry about in this regard...

We have moved far beyond financial policy and into the kind of scandal that really gets taxpayers’ backs up. The greed of bankers slaps you in the face while the hubris of their leadership remains unchecked.

There is no sense of responsibility, no feeling of shame, no acknowledgment of any kind of mistake: read Lloyd Blankfein’s FT article again - or print it out and tape it to your wall. Because we now know, from the newly disclosed AIG counterparties list, that the wealth of Goldman Sachs insiders remains high solely because we saved their sorry bank, their failed risk management strategy, and their pretence of wisdom with our cash in mid-September.

This resentment against bankers pervades Congress, and even the Administration begins to get the message - being called “asinine” yesterday by Richard Kovacevich, the Chairman of Wells Fargo, may have helped underline to Treasury how deeply the bankers appreciate the help they have received. There can be no resolution and no moving on until there has been a proper congressional investigation, with full subpoena powers...

Ben Bernanke knows all this, at the same time as he sees our economy worsening and global storm clouds still gathering. So where will he take us... Inflation breaks the political and social logjam around banking. With some luck, it helps growth - at least in the short-term.* And of course the surviving bankers win big.
Now It's Official: Public Private Partnership to Overpay for Toxic Bank Assets - "This is billions to avoid price discovery, which is what it needed to assess the magnitude of the problem, attract private capital, and do triage on sick financial firms. This is simply a Japan solution with a lot of moving parts to disguise the essence of the undertaking."

Business As Usual - "please review carefully Jamie Dimon’s speech... [He, who runs JP Morgan Chase] strongly implies that it is time for the government to stop worrying... the time for really big transfers of taxpayer value is now... it is obvious, from the words, tone, and body language of Mr. Dimon that he thinks his side has won and it is back to business as usual, albeit now with a somewhat larger market share. On all of this, he probably has inside information."

When did the crisis begin?
We've had a cancer, with some superficial remissions, but fundamentally, for the entire period from the 1980s to 2008, our financial system in general and our banks in particular have been broken. They have profited from allocating capital poorly, from funneling both domestic loans and an international deficit into poor investments (current consumption, luxury housing) rather than any objective that might justify arduous promises to repay...

Thanks to the cleverness of our banking system, we have a very great many lenders, both domestic and foreign, who've invested in trash but who demand to be made whole at threat of social and political upheaval. That is the failure of our banks. That they are insolvent provides us with an occasion to hold them accountable, and to reshape them, without corroding the rule of law or respect for private property.

There are profound economic problems in the United States and elsewhere that our financial system has proved adept at papering over rather than solving... the people who could never see the problems are the only ones invited to the table when the world cries out for solutions... But the temple is not sound.

The banking mess and the high unemployment rate are not the crisis, they are symptoms. This is not "dynamo trouble", it is a progressive disease, and what is failing is the morphine. Those of us who believe that financial capitalism is a good idea, that it could be the solution, not the problem, do their cause no favors by resisting radical changes to a corrupt and dysfunctional facsimile of the thing. We need to approach financial capitalism as engineers, and to largely rearchitect a crumbling design. If we don't, we may be so unfortunate as to suffer yet another superficial remission. But error accumulates, and error on the scale now perpetrated by national and international financial institutions is unlikely to be without consequence.
Complexity
High up peoples’ list of culprits for the credit crunch is complexity. The accusation? That certain financial products were incomprehensible to all but a tiny few. Buyers and sellers, therefore, had no idea what they were trading. Executives devised entire strategies on businesses they did not understand. Regulators and ratings agencies flapped about in the dark.

The solution is to make things simpler, right? Wrong.** For that supposes humans are opposed to complexity when in fact they create it whenever possible. Many sociologists see the process of making the simple complicated as one method social groups employ to help identify themselves. Linguists sometimes refer to “esoterogeny” where speakers add verbal tricks in order to make their language harder for outsiders to understand and to foster inclusiveness.

So why do it in finance or any other industry? By making what they do incomprehensible to everyone, bankers, management consultants, plumbers and academics protect their franchise, and therefore their earnings. Adding complexity is doubly important in industries where nothing physical is created. It is no surprise, therefore, that those earning the most money ended up in jobs that noone else could understand.

That makes a policy response pointless. If regulators tried to simplify asset backed securities, their complexity would simple take another form. Banks cannot have anyone off the street applying to trade derivatives (although research shows that random punters would be just as profitable). And dumbing down the entire banking industry would just result in a complexity bubble (and higher wages) emerging somewhere else.

Now that governments around the world have all the power – with workers from the private sector clambering to get on board – it is a fair bet that public offices will be next to pile on the gibberish. After all bureaucracy in all its numbing detail is simply another form of complexity designed to keep a frustrated public at bay.
Reining In Banks - "banks have too much power - they will capture, influence, or arbitrage their way around any regulatory structures so that the next bubble, whenever and wherever it appears, will be at least as damaging as the last"

Talk To The Bear: A Conversation With Nassim Nicholas Taleb
My rosy scenario is that a better economic environment will develop, a low-debt, robust growth world, in which whatever is fragile will be allowed to break early and not late.

My nightmare scenario is that the government saves Citibank once again, as well as the other banks, and business resumes as usual. Then, the next time the system breaks, it breaks much, much bigger.
that is all!

---
*also see GDP Forecasts from the WSJ: "By end-2009, the output gap is predicted to be 7.6% [rivalling] the back to back 1980 and 1981-82 recessions" -- wrt Goldman’s Hatzius on the Next Doses of Stimulus: "the risk of deflation is still substantial because there is so much slack in the economy... the Goldman economist says the Fed would need to grow its balance sheet to as much as $10 trillion to steer the economy away from a serious and dangerous long-term risk of deflation..." um, so, to put that in perspective, the fed's b/s was less than a trillion last year, pre-TARP, is now just under two, and set to double again with 'geithner puts' TALF locked and PPIF loaded, viz. A world of credit easing, but per hatzius, the fed would still need to more than double that again (running out emphasis!) to essentially liquidate/monetise 'bad assets' and absolve everyone of their sins; yea, jubilee! :D of course, as hatzius notes: "Although this may be feasible in theory, it could interfere with the functioning of financial markets and would pose a gargantuan 'exit problem' once the deflation threat had passed. Balance sheet expansion on this scale is therefore probably undesirable." so instead he's proposing to borrow and spend $2 trillion over five years :P or we could just let it all drop...
**cf. "Exploring whether Moscow might press the Iranians would be useful, right? Wrong."
posted by kliuless at 1:49 AM on March 18, 2009 [1 favorite]


If you're cousin Louie got into some financial trouble and you decided alright here's five thousand to get back on your feet. Next thing you know he's down at the casino gambling away 50 bucks. You wouldn't stop to ask WTF are you doing?
posted by P.o.B. at 6:44 AM on March 18, 2009


If you're cousin Louie got into some financial trouble and you decided alright here's five thousand to get back on your feet. Next thing you know he's down at the casino gambling away 50 bucks. You wouldn't stop to ask WTF are you doing?

Yeah, but in all fairness to AIG (now there's a commodity in short supply!) isn't this more like your cousin Louie paying off debts he ran up with his bookie before he borrowed your money? I mean, you'd rather the money wasn't going to bookies, but it's probably better than Louie getting his arm broken.
posted by yoink at 9:37 AM on March 18, 2009 [1 favorite]


AIG Paid retention bonuses to employees who were leaving.

Good to know we've put our economy in the hands of people who are so upstanding.
posted by delmoi at 10:58 PM on March 18, 2009


the baseline scenario just linked approvingly to this project, by the way. It's hard to argue that Simon Johnson actually disagrees with the rest of the platform.
posted by delmoi at 8:48 AM on March 20, 2009


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