Sunday, February 15, 2009


Farting into the wind

by Larry Geller

Although the forecast was for high gusts up to 40 mph, it was absolutely calm as we parked in Kalihi to grab some quick pre-theater sandwiches.

Some people were playing chess, others were standing around talking. There was no laughter, I recalled later.

The next paycheck is two weeks away. Things are getting tough, and our government doesn’t seem interested in helping us. Heck, they’re going to make us pay for saving Wall Street, a fictional place in far-off New York City. In Kalihi, there are no fat cat bankers, just a few cheap restaurants, a decent library, a few pawn shops, far too many potholes. Nothing to laugh about.

BILL MOYERS: Are you saying that the banking industry trumps the president, the Congress and the American government when it comes to this issue so crucial to the survival of American democracy?

SIMON JOHNSON: I don't know. I hope they don't trump it. But the signs that I see this week, the body language, the words, the op-eds, the testimony, the way they're treated by certain Congressional committees, it makes me feel very worried.

I have this feeling in my stomach that I felt in other countries, much poorer countries, countries that were headed into really difficult economic situation. When there's a small group of people who got you into a disaster, and who were still powerful. Disaster even made them more powerful. And you know you need to come in and break that power. And you can't. You're stuck.

We’re stuck. We march on Washington and still they invade a country and kill hundreds of thousands of innocent people.

Now we’ve forgotten about the war. We’ve got an economic crisis on our minds. Our thoughts are of ourselves, of our families. Congress was deluged with phone calls and emails asking that they not lay billions of dollars of our money on crooked bankers. We wanted Congress not to agree to Paulson’s three-page plan to basically reward the crooks for their greed and poor judgment. Congress was more than generous. Two days later the bailout was sealed with a bipartisan kiss. Bankers took home obscene Christmas bonuses and rewarded their triumph with fancy resort parties.

SIMON JOHNSON: The powerful people are the insiders. They're the CEOs of these banks. They're the people who run these banks. They're the people who paid themselves the massive bonuses at the end of the last year. Now, those bonuses are not the essence of the problem, but they are a symptom of an arrogance, and a feeling of invincibility, that tells you a lot about the culture of those organizations, and the attitudes of the people who lead them.

BILL MOYERS: Geithner has hired as his chief-of-staff, the lobbyist from Goldman Sachs. The new deputy secretary of state was, until last year, a CEO of Citigroup. Another CFO from Citigroup is now assistant to the president, and deputy national security advisor for International Economic Affairs. And one of his deputies also came from Citigroup. One new member of the president's Economic Recovery Advisory Board comes from UBS, which is being investigated for helping rich clients evade taxes.

You're probably too young to remember that old song, "Sounds like the Mack the Knife is back in town." I mean, is that what you're talking about with this web of relationships?

SIMON JOHNSON: Absolutely. I don't think you have enough time on your show to go through the full list of people and all the positions they've taken. I'm sure these are good people. Don't get me wrong. These are fine upstanding citizens who have a certain perspective, and a certain kind of interest, and they see the world a certain way.

And it's exactly a web of interest, I think, is what you said. And that's exactly the right way to think about it. That web of interest is not my interest, or your interest, or the interest of the taxpayer. It's the interest, first and foremost, of the financial industry in this country.

You and I have an interest in surviving. Heck, we want more than to struggle, we want to thrive and provide a great future for the next generation.  Those “fine upstanding citizens” have stolen that future away from our children.    

BILL MOYERS: When Tim Geithner said, earlier in the week, that the American people have lost faith in some financial institutions and the government, did it occur to you that this was the same man who was president of the New York Fed through much of this debacle?

SIMON JOHNSON: I have no problem with poachers turning gamekeeper, right? So if you know where the bodies are buried maybe you can help us sort out the problem. And I did think the first three or four minutes of what Mr. Geithner said were very good.

As a definition of a problem, and pointing the finger clearly at the bankers, and saying that the government had been slow to react, and, of course, that included himself. I liked that. And then he started to talk about the specifics. And he said, "The compensation caps we've put in place, for the executives of these banks, are strong." And at that point I just fell out of my chair. That is not true. That is factually inaccurate, in my opinion.


SIMON JOHNSON: That this $500,000 limit, and deferred stock, is some kind of restriction on what they do? It's deferred stock, Bill. It's not restricted. You can get as much stock as you want, as soon as you pay back the government, you can cash out of that. That's one.

Second, you can, sorry to get technical, but reset the strike price. This is something you and your and your viewers, you need to hear this one out. Just look for these words, okay, follow them through the press. When you get into trouble, when your company goes down, and you have massive amounts of stock options that aren't worth much anymore, because the stock price has gone down, you say, "Oh, well, we're going to reset our option prices."

And, basically, it means that, at the end of the day, these people are going to walk away with tens if not hundreds of millions of dollars paid for by basically, insurance policy that you and I are providing.

Think of it like this, our taxpayer money is ensuring their bonuses. We're making sure that companies, that banks survive. And eventually, of course, the economy will turn around. Things will get better. The banks will be worth a lot of money. And they will cash out. And we will be paying higher taxes, we and our children, will be paying higher taxes so those people could have those bonuses. That's not fair. It's not acceptable. It's not even good economics.

BILL MOYERS: Are we chumps?

SIMON JOHNSON: We'll find out. Yes, we may be. Okay. It depends on how we play this politically. It depends on what our political system does. It depends, I think, on the level of reaction. The financial system is playing us for chumps, okay? The bankers think we're chumps. We'll find out. We have leadership that can handle this. We'll find out what they do.

Don’t hold your breath, though. At the Subway a footlong was going for an affordable $5. Chumps. We had nothing to do with this depression we’re in. One day it happened. Who knew that Wall Street was playing Monopoly with real money? Chumps? We had no part in this.

But we do complain. Or we hold signs up to passing motorists, hoping for the beep of a horn. We blog. The commercial press is worried about its own survival, and they never cared much for us chumps anyway. So we blog to each other. Chumps? We voted, we put a guy in office who promised change. We get chump change, of course.

So we hold meetings, we join groups. We write letters to some fictional editor. We complain to each other about foreclosures, about Republicans, about Obama, about being cheated out of our election hopes, about the people’s mandate going unfulfilled. We talk about empire and decay, about democracy, about increasing social violence and unrest, about police brutality (the latest [thanks, Viviane]: NYPD okays Velcro handcuffs for use on unruly children), about domestic violence, about bullying in the schools. About unemployment, about budget cuts. About California’s upcoming bankruptcy, or about how universal health care would be nice to have (pretty please). Nothing changes.

As we stood in line for our tickets outside the Ernst Lab Theater it was chilly but still calm. Quiet, time to think how good it is that we can still see some great dancing for a reasonable price. Gotta watch the budget these days, and the lab theater is a great deal.

It was wonderful.

During intermission a couple and I, waiting outside in the now blowing wind, complained to each other mostly about the failure of the new Obama administration to keep its promises. And of the futility of anything we might do. The wind was blowing more strongly, and I got the inspiration for the headline of this post. It doesn’t matter what we say or do.

Reality Check

Is it really so bad that Obama is happy to put the same people that caused this mess in “control” of our economic recovery? Check this out:


Clicking on the image will get you the entire Carlyle Group report from which it is taken. This is page 13 of 80 pages. The report is dated 15 October 2008.

The comparison to the Great Depression is via percent of GDP, so indeed we are in much deeper doodoo. We have hollowed out our industries. For example, GE used to make things, but these days they are big players on the financial scene. Much of the stuff with the GE meatball on it is made in China.

Will the US auto industry be able to recover? Will they opportunistically switch to importing foreign cars and dump their labor woes in the gutter? Where will those cars come from? China? India? The crooks that got us into this are not motivated to get us out of it. Obama might have chosen a different set of crooks, anyway.

A few pages deeper into the report (page 35) is this slide on China:


China is “awash with liquidity.”  Can you beat that.

What about the average American, about to lose job, home, and health care? The Carlyle group doesn’t concern itself about that in particular. Nor, it seems, does our government in Washington, especially the Republicans. The vote on the stimulus bill was strictly on party lines. In order to get that zero cooperation, Obama threw away chunks of benefit. In the end, our tax incentive is less even than Bush paid out.

Not only have Congress and the White House bailed out their Wall Street buddies, but their Wall Street buddies can be counted on to recycle some of their bonuses back into campaign contributions to keep Congress compliant.

They’re scratching each others’ backs. It’s the same game, folks. Same as always. Nothing has changed. Bill Moyers, Jon Stuart and Stephen Colbert tell it like it is every week (you have a choice, cry or laugh). Bloggers blog. No use. It stays the same. The same. The same. The class war is not going our way, nor shall the meek inherit anything, it seems.

Tomorrow is Presidents’ Day. Thank you, Mr. President, for the hope at least.


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