This week is money week. Today, a summit on fiscal responsibility here at the White House. Tomorrow, Obama addresses a joint session of Congress to outline his budget and make the rhetorical case. Thursday, Obama’s Tuesday night rhetoric is revealed in detail.
In addition, the main topic of conversation amid roiling markets is bank “nationalization,” a word evocative of South American dictatorships that the White House is wary enough about to insist – as repeated today – that Obama wants a privately held banking system regulated by government.
And repeated again – Obama wants "a privately held banking system regulated by government."
“Why can’t you just say, we are not going to nationalize the banking system?”
Obama believes "a privately held banking system regulated by government" is the best plan.
It’s a minefield out there.
OK, if we can’t get an answer on that, how about this. At the fiscal responsibility summit, Obama said, “Today I'm pledging to cut the deficit we inherited in half by the end of my first term in office.” But doesn’t that work against the stimulus, which involved increased spending and lowered taxes?
Answer: wait for Thursday, when all will be revealed.
In his East Room remarks at the fiscal responsibility summit, Obama pledged that one way he’d make the budget workable is going through line by line and eliminating programs deemed wasteful. Apropos of last night's Oscars, Obama’s rhetoric in his sumit remarks was reminiscent of the movie “Dave,” starring Kevin Kline as a lookalike who becomes the president (think “Moon Over Parador," set in America... and Parador probably had nationalized banks). Kline brings in his buddy Charles Grodin to cut inefficient, wasteful programs from the federal budget, so that Kline can then afford a program that will enable him to sleep with Sigourney Weaver.
Obama cited the training programs, conferences and travel at the Department of Agriculture, payments to agribusiness “that don’t need them,” no-bid Iraq contracts, ending TBFCSJO (tax breaks for companies shipping jobs overseas), and fraud and abuse in Medicare. Budget Director Peter Orszag is the Charles Grodin character in this scenario.
(I‘m not sure who Sigourney Weaver would be... Michelle, Chuck Todd, the actual Sigourney Weaver, or the American people – awww!)
Will that be enough? Probably not, and perhaps if for no other reason than Obama will inherit a budget full of thousands of earmarks already established by previous budgets, with Congress heavily involved in protecting its turf, and no line-item veto in a president’s pocket. In addition, Obama said today that what happens this week is just the beginning, calling the rising cost of health care “the single most pressing fiscal challenge we face by far,” and citing “the long-term solvency of Social Security” as the major forces that will require “tough choices.”
When pushed back on how the president can possibly make all of these things a simultaneous priority, the answer came again – wait for Thursday.
In other news, Gibbs said that an executive order on stem cells should be expected within weeks.
Finally, word out of the administration tonight is that former Washington Governor Gary Locke is the next Commerce Secretary nominee.
*_*
EDIT: I feel a little stupefied by consensus that this was an "angry" post (if anything, it felt more playful than most with the movie comments). To be clearer, the White House is being pressured on the issue of bank nationalization, I was characterizing the pressure and the careful replies, every word being carefully scrutinized, the markets reacting to the words, the White House is trying to use every last bit of time it can. That seemed to be the main story of the day. I regret the lack of clarity.
2.23.2009
Money Week Begins; White House Careful; the “Dave” President?
@ 5:47 PM
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FIRST time poster here, and I must say, this article seems awfully angry compared to most everything else on this site
I think the CITI model, i.e. converting preferred stock to common stock (preferred stock that was bought with previous bailout money) might provide a good guide for where the president wants to go.
You are right Sean. Obama is a sock puppet of a president. He is now becoming severely over exposed in the media. His advisors keep tripping over themselves. Every time Obama or staff open mouth, the market tanks. At this rate we will be at Dow 5000 in a month.
The investor class is getting tired of having the market implode. If things don't change, it may be possible that one or both houses of congress will change. The people want the bleeding to stop.....
Is there some way to set up the software for this URL site so that it can create an automatic hide for certain bloggers?
If the last administration hadn't been run like a South American dictatorship, (massive cronyism and massive deficits) there'd be no need for South American style solutions.
Obama's promise to "cut the deficit that he inherited in half" is easy. The deficit is the amount that the government overspends by *each year*, not to be confused with the debt, which is the total amount of money the government has borrowed.
In other words, if the deficit is cut in half, the national debt would still grow considerably that year.
If you believe that the stimulus is a one-time expense, and there won't be more stimulus packages required in 2012, then the stimulus is not a factor in Obama's pledge to reduce the deficit in his last year in office.
In fact, if he is counting the TARP as counting towards the "deficit he inherited" then it might be downright easy for the deficit to be half of that in 2012, assuming of course that the economy has reasonably recovered by then.
Nate,
Listen to the silence. The President says out loud that he wants "a privately held banking system regulated by government." The wanting part means it's a goal.
The silence is about the path to the goal. He isn't ruling out short-term takeovers. He understands that saying "we might do some takeovers" would do harm. A good takeover is over before we know its coming. So he's not gonna tell us we may be about to see some happen. He's not even gonna tell us he's not gonna tell us.
The silence is a feature, not a bug. It's a decision, not a waffle.
If you double the deficit in the first month of office, it shouldn't be that hard to cut it in half in four years. duh...
I'm with Sean on this. The administration has not inspired confidence thus far on fiscal matters.
The administration can't say they're not going to nationalize the banking system, any more than they could say we'll never use nukes on anyone. That's irresponsible. Grow up.
You can cut the deficit in half if you double spending as your first act.
I tend to get out here spouting a pretty conservative line. And I will probably continue to do so. But I still have a lot of optimism about Obama.
I have a feeling that when he says he will cut wasteful programs he is telling the truth. He cannot operate a government that is as heavy as it will be in a year. This can mean a lot of great things if he is as smart as he sounds.
As far as bank nationalization, I'll hold judgment. I have a moral objection to it, but I have a moral objection to a lot of things that might become necessary. As long as they follow better economic principles than the House Dems, I'm okay with Geithner making banking decisions.
Also: go stem cell research.
cybercitizen, Jack's actually doing all of us a favor here, bringing the worst of the doltish, reactionary right wing blogosphere conveniently to our doorstep.
No fuss. No muss.
Man, I remember when the Dow Jones was last at 5,000. I had just started college, Pakistan was seeing Babylon 5 for the first time, the world got to use the first version of the Java programming language, the Nintendo 64 game system was released in Japan, and it was a leap year! It was also the year Carl Sagan died, so it wasn't entirely a good year.
But thank you, Jack! There were a lot of memories in 1996, and the stock market hitting 5,000 for the first time was one of them!
It's never the same the second time, is it?
I wonder why that is.
Somehow Jack-Be-Simple thinks his comments are clever and appropriate. But I guess most 15 year old pimply faced kids whacking away on Mmmy and Daddy's computer in the basement would think that.
What an asswipe.
I agree with hudy23. This commentary is long on sarcasm and short on meaningful comment. A waste of my reading time.
Cutting a trillion-dollar deficit in half still means living with deficits that would have been considered unimaginably huge pre-W.
Why can't Obama simply say we're going to nationalize the banks?
Because doing so before he's ready to take them over would ensure they fail and must be nationalized. They'd lose the ability to raise private capital and their stock values would zero out.
I have to agree with some of the other commenters... while I really enjoyed your series on the ground game for the presidential election last fall, the quality of your posts since then has really declined. This particular post is rather sophomoric, honestly. I hope to see some improvement.
wv: emeribep A retired censor?
> Obama wants "a privately held banking system regulated by government."
Why not say that. That's what we have in canada, and it works fine. That's what, if you had had one, would have prevented this whole fiaco in the first place.
And I echo the queries about the angry tone of some of these comments. What's with the hate on for Obama. Can we have some response NOT based in the vary same failed politics that created the mess in the first place?
On Saturday, the chief economist for the leftist-marxist-communist firm Moody's (who was also a McCain adviser, like Lindsey Grahman)called for nationalization.
So that's Comrade Greenspan, Comrade Graham, and Comrade Moody's (Mark Zandi).
Downes:
Here's the problem with a full nationalization of banks:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aoKti29TR4tE
Whether or not these things work in Canada is irrelevant. Government intervention doesn't work that well in the US. We see it with this latest news from AIG, with GM and Chrysler, with Fanny and Freddy, and the list just goes on. It's not a purely ideological position on my part, it's just been consistently proven that these things don't work.
That's why I don't like the idea of nationalization.
And in re: angry tones, nothing makes a conservative more angry than a trillion dollars in questionable spending. China passed a great stimulus that will give them new highways and ports and high speed railways and fixes roads and makes agricultural transportation cheaper. We get wheatherized schools and some more local water color expos.
It's generally upsetting if you don't fully subscribe to the notion that any spending is good spending.
Obama's so-called reductions start with 2009 as a baseline - a year that includes stimulus spending that will obviously be largely reversed once the recession is over.
In 2007 the deficit was 166 billion. Maybe you could make it higher with different accounting standards - I'm willing to grant that. Obama's proposed deficit reduction would have us at over 500 billion 5 years from now. That hardly sounds like much of a reduction.
Why not say that. That's what we have in canada, and it works fine. That's what, if you had had one, would have prevented this whole fiaco in the first place.
I'm sure Obama would give his two front teeth to have a banking system like Canada's (no failures) and a budget that's balanced as well has Canada's (hell, he'd probably be happy to be handed a system that runs as well as Mexico's at this point).
That's right, foaming dittoheads, the unholy secularist socialist (with national health care) country of freaking CANADA has a balanced budget (and has for many years), and no bank failures (but no cod, either).
Statler's right about a lot there (I tend to think that we disagree on most things, so it's nice to say that). I would like to point out, however, that there is are gradations that we have to acknowledge with banks.
We can, and must, let some things fail. Citibank has proven itself unable to function. It's business plan is flawed. It is properly called a zombie bank and it is spending its time eating the brains/money/resources that are better spent elsewhere.
BofA is certainly an entity that cannot fail. If it needs to be nationalized (as much as I hate it) then so be it.
They're different banks and require different approaches. This will certainly be politically difficult for Obama, but he seems to understand that certain decisions, however painful, must be made with an eye towards the best possible outcome at the end of this, instead of simply making our decline more gradual.
There is no need to "nationalize the banks" Just provide money in a way that protects the taxpayers interest. That means that we say who in in charge and we break up the bank into many parts, each of which is purchasable at the appropriate time once the various small banks are stable. The new banks are regulated so they can never go Feral again as they did under Bush.
Let the Feral, Antisocialist, Gang Of Pirates, keep calling civilized society "Socialist" and we can keep pointing out that it is better than "Feral". As in "Feralist Society"
Double Star by Robert Heinlein predates both those movies, and is a lot better than either.
Oh an Obama can easily half the deficit, if he cancels and claws back the Bush Splurge, and then saves the banks in ways that protects the Taxpayers interest and makes a profit (even if the profit is down the road)and creates a tax system that penalizes Feralist behavior, while rewarding Socialist behavior, the Budget could go a long way to balance very quickly.
TubeZone,
That's what Marx said.
This is probably the worst post I have read on what is otherwise my favorite political site. If I want to read posts with nasty attitude I'll head over to dKos, thank you very much.
And "No really guys, it was a joke!" is not the right answer.
Wow, sean was just letting us know how the media is pressing for an answer, and the white house is tip toeing, because it understands it has to. come on guys.
Sean I am also stupified by the "angry" comments. I honestly don't see a single sentance that I would remotely qualify as angry. Good post as always. Still the best political website out there, in spite of a strange comments section.
The jury's still out on the Canadian banking system. Let their housing bubble deflate fully before you declare it sound.
Canada's health care system, on the other hand, should be the subject of laser-like focus. Imagine offering everyone in the U.S. quality health care for 2/3rds the per capita expense we now incur to leave 50 million of them begging in the ER?
Hang on, I wasn't factoring in the latest layoffs...make that
... for 2/3rds the per capita expense we now incur to leave 60 million of them begging in the ER?
Wait again. We'll soon have a lot of local government layoffs in addition to another few million in the private sector. So, let's make that...
.. for 2/3rds the per capita expense we now incur to leave 65 million of them begging in the ER?
And counting!
Oh, and Sean, your post was playful in tone.
People are overly sensitive about Obama. I've seen four seperate complaints at the NY Times site concerning that paper referring to President Obama as "Mr. Obama". You know, just like every other freaking president since Washington.
Now you're being "angry" for playfully calling the administration out on its use of weasel speech. Good for you, Sean. Rage on, laddy. Do you hate puppies and kittens?
Nate
How about an update on the Minnesota Senate election contest? I know it is boring as hell but there were major developments today. The court issued two rulings. One appears to give Franken 12 more AB votes and the other denied a Coleman motion to have ballots admitted by classes.
Also, Coleman spokesman Ben Ginsberg pretty much declared that their side will be done this week.
Sean, great post. The critics have little imagination and even less humor - a bunch of dour Eeyores. Then again, I thought the footage from today's fiscal responsibility summit was the funniest shit I've seen in a while, particularly the contemptuous glare Obama gave Cantor as he prattled on, followed by the curt "NEXT" practically before Cantor had finished speaking.
I didn't think you sounded angry, Sean :)
Statler:
Apparently we are in pretty much perfect agreement. Which makes me wonder why there's been no action on this if both sides are agreeing on the issue.
I'm sure that we disagree on how to value assets, but those are minor and can find an easy middle ground. It's not like there are ideological issues surrounding mark-to-market.
I'm of the mindset that we've actually discovered a bottom, given that housing sales are going up. Unfortunately, distressed properties are pulling down the rest of the prices, and so it's still a bit bloody to discover anything concrete.
I think that a more pressing question is actually the prices of ALL goods and services - even as far as currencies. We have been so used to working in an artificially inflated system that we really have no concept of what anything is worth. That's one of the reasons that concepts like the 'buy american' contingency is sort of scary. As the entire world economy settles, we have to find out where we are competitive, and we can't do that by altering prices on things so basic as steel.
Awkward "we are in perfect agreement" after your "Sean looks cute" comment.
Sean, don't listen to the haters. I like your posts with all of the humor and righteous emotion intact. Keep 'em comin.
hosertohoosier said...
In 2007 the deficit was 166 billion.
H2H,
Not according to WorldNetDaily - it actually was $4 Trillion.
http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=59577
It DOES state that the reported deficit was $163 Billion. Since that was the WND report from a Treasury Department official, one wonders whether the costs of the War on Iraq, running at somewhere north of $10 Billion per month are included - a minimum of $120 Billion?
Then again, when you go to the Treasury Department's 'Daily History of the Debt' web page (http://www.treasurydirect.gov/NP/BPDLogin?application=np), it shows that on September 29, 2006 (the last work day of Fiscal Year 2006), the Total Public Debt Outstanding stood at $8,506,973,899,215.23, while on September 28, 2007 (the last work day of Fiscal Year 2007), the Total Public Debt Outstanding stood at $9,007,653,372,262.48.
By my calculations, that is a difference of $500,679,473,047.25.
Hmmmm, seems the Treasury Department admits that the FY 2007 deficit is more like $500 Billion. Do we believe the (full of male bovine dropping) PR from a Treasury flack, or the actual numbers that Treasury hides? Remember, most PR departments work under the dogma that bad news is hidden, while any other information 'information' is 'disclosed' only in the most favorable manner possible.
It is my impression that the Obama administration is working under a different dogma - tell the truth, no matter how bad it is, as then it is easier to tell what is actually happening. For instance, instead of pretending, for budget purposes, that the War on Iraq doesn't cost anything, those costs are now being included in the budget as actual costs, not off-budget and imaginary costs, as they were during little shrub's demented administration.
I just read the post before reading the addendum/apology, and I have to say I thought it was playful, just as Sean intended. Print is such a harsh medium, though, and sarcasm doesn't come through very well. Maybe Sean should have used more smileys and exclamation points!!! :)
P.S. that last line was a joke, in case you didn't pick up the sarcasm.
Ahhh I loved the movie Dave!
I do think one or two posters need to give Sean a break! This wasn't an angry post at all. Simply it seems to me that it was outlining the problems any government is going to have communicationg its message, and the perrenial problem of cutting the budget deficit. (personally I am always suspicious of any government that talks about cutting spending.)
Sean,
For the record, I love your posts; and you didn't sound at all angry. I'd totally take you behind the middle school and get you pregnant.
@Susan Weston- Spot on- great post. Lincoln did the same thing. Tell the truth in such a way that people can hear you- not in such a way that you scare the shit out of them.
Luckily, we just happen to have collected all these inspectors at Fannie Mae and Freddie Mac, who, if they were given complete access to the books, could probably separate the zombies from the recoverable banks pretty quickly.
I mean, that's mostly what they used to do- evaluate CDOs and mortgages to figure out their actual value, and then insure them. They should be able to do that now for existing CDOs and mortgages.
"Nationalization" is really, really the wrong term for what is being discussed. I haven't seen anyone proposing that the American banking sector be run now and in the future solely by the government.
A much better word is "receivership." Failed banks are put into receivership by the FDIC all the time. The receiver takes over control of the bank, liquidates some of the assets, writes off other assets, restructures the bank's relationships with its creditors, and then returns the bank to private control.
The proposals being discussed are, essentially, receivership on a large scale involving some of the largest banks that contain billions in toxic assets. These banks have to be dealt with eventually to avoid the possibility of a meltdown of the banking sector, taking good assets down with the bad. It's far better we do that in a way that preserves as much value as possible for the taxpayer, rather than simply funnelling money to banks that invested badly, thereby rewarding their shareholders and management.
KF,
In Sweden, they did just what you described and called it nationalism. This is because the Swedes don't see socialism as a bad thing.
In the US, anything that sounds remotely like socialism is hyperbolized into the USSR. They used to say that daycare was a commie plot, for fuck's sake.
So as to accomplish the same end goal without waking up the paranoiacs what listen to Limbaugh, we call it receivership, because nobody knows what the fuck that means.
Okay, I'm exaggerating a little. Nationalization is a little more than just receivership, because the gov't holds controlling (voting) stock in the bank during the corrective period. This is not as crazy as it sounds, though-many banks in recent months have taken TARP money and refused to release credit, blowing the money on highly irresponsible things, like wild weekends in an LA hotel. Controlling stock means you get to bring out the NO hammer the minute some idiot on the board tries to use TARP money to fund his trip to Lake Tahoe
Sean, who sez you're angry? Looks to me like you're just reporting on the pressure that is being put on Obama by his questioners, while adding an analogy to some movie I've never seen.
I didn't get the impression at all that the post was angry. Keep up the good work, Sean.
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