Gates to Stay On as Sec Def

The announcement has been made that it looks as though Defense Secretary Robert Gates is going to be staying on in the Obama Administration for at least the next year. There are many among us on the left and in the anti-war crowd who have not been at all pleased with this turn of events.

But as I see it – and I believe I’ve made this point somewhere along the line in the past – you can’t expect a new Sec Def to swoop in and move one hundred and forty thousand troops out of Iraq in a year without huge problems. I mean, you couldn’t even unpack a box before you started planning the withdrawal, and it would likely be a disaster no matter who you were. I think that if you’re serious about your pledge to get troops out of Iraq in the next eighteen months, you have to maintain some sense of continuity in the military hierarchy to do that. Of course, my years of working as a Secretary of Defense((that would be zero years, for you keeping track)) don’t lend themselves to an educated opinion on the matter.

Besides which, I think anyone whose been paying attention knows that Robert Gates has been as forthcoming as any member of the Bush Administration with Congress and the public. That’s not saying a lot, I grant. But it seems like he’s more sure of himself and less inclined to stonewall for the sake of his personal reputation alone. I think that, with a new president of the same party as the majority in the Congress, you will probably see much more candor going forward. That’s just a guess.

And its a damned shame that we can’t do the same with the economic team, but goddamn. I’ve never seen a guy fall so far so fast as has Hank Paulson. Ben Bernanke just seems like a putz lately, too. These are two guys I know from watching Wall Street Week for years, and I’ve been nothing short of shocked to watch them crumble in the face of this crisis. So, on that level, we need new leadership.


The Bailout: it’s About Us

I think that the conversation on the national level is beginning as usual to tear itself away from rational thought, towards the kind of feedback loop of nonsense we’ve come to expect.  Local media, meanwhile, is noticeably absent from the entire conversation, which we’ve also come to expect.  So, allow me to point out a few things that bear mentioning:

Regardless of the circumstances, the rich will never suffer.  The rich never do.  I’m not talking about your cousin Bob who is a stock broker for JP Morgan Chase.  I’m talking about the real movers and shakers.  The Vanderbilt’s, the Rockafellers, the names we don’t know and never will.  The top executives at the top firms who went to the top schools and who’ve lived their entire lives at the top.  This is not their economic crisis.  They’ll be just fine.

It will be all our down-stream friends and family – what is popularly called Main Street, these days – that will suffer the consequences of whatever will come next.  It’s our jobs that are hanging in the balance, our homes, our financial futures.  Hell, it’s our tax money.

So when seen from this lens, how can it be anything other than right and proper that Congress put the brakes on and demand some sort of recompense from those we bail out?  It’s not really about demanding things of other people, it’s about getting the change we want out of an opportunity to demand said change.  It’s not about taking from the rich – they will lose nothing of value; its about securing our own futures.  We can restore the Depression-era oversight and regulation that has kept our banking system on the straight and narrow since then – except in those times when Republicans have chosen to ignore them.

By-the-by: don’t get sucked into the refrain that regulations need to be “updated.”  Even Barack Obama is saying that crap.  “Updating” right and wrong is not needed.  Enforcing it is.

And the answer is simple: in the words of Dean Baker, sell the company assets, and you’re in.



I’ve not been reporting or analyzing on the current state of the financial meltdown very much in the last week.  That’s at least in part because things are moving so fast at the moment and statements are coming from so many different quarters, it’s difficult to keep up with in a meaningful way.  I don’t see any reason to add to the din unless I can provide something on the order of a coherent statement, which at the moment is difficult.

But one thing I can say for certain is that the speed of the recovery effort is more troubling than the speed of the crisis, at the moment.  There’s lots of big headlines and breathless discussion in the media, but let me say that no one in a position of authority should have been surprised by what is happening now.  The subprime/ARM mortgage meltdown has been going on for eight months and it is on the basis of commoditized mortgages that a lot of wealth has been built which is now disintegrating.  Where were all these leaders while Secretary Paulson was handing out bailouts?  Where were the big questions that might have provided us a more organized solution?

And now that we’re trying to come up with a national solution to a problem, I am drearily unsurprised to see that the problem at hand is largely rich people losing money.  No one cared when some grubby poor people were losing thier homes, but now that large bank executives are in danger of losing their yachts, it’s all hands on deck.  So, now the Congress is expected to hand over $700bn dollars to the White House that brought us Katrina and Iraq without strings.

Here’s a question that’s worth asking: what, precisely, is the purpose of all these billions of dollars?  Irrespective of what we do in the short run, there is nothing more fundamental to this crisis than the fact that all of the wealth accumulated in the last ten years or so was built on an entirely false pretense: the notion that these mortgages were going to be paid off.  No matter what we do in the next three months, a breathtakingly large portion of global wealth is about to evaporate.  Irrespective of whom does the selling – the government or the banks – the bad debts which are the basis of the problem will necessarily be sold at fire-sale prices.

The plan as far as I can tell is that the White House wants to buy up bad debt – whose value is in free-fall – from banks at a fixed price.  Guess whom that benefits?  If you guessed “the banks,” you’re spot-on.  Because we’re never going to get our $700bn back from selling those assets.  It’s like buying a bag of over-ripe bannanas.

I think Hank Paulson is a genuinely disciplined and principled person, based on what I know of him and what I see of him in interviews.  I’m watching him on This Week right now, and there’s no question he’s freaked out, but he’s clearly trying his best to solve a problem for which there are no easy answers.  And of course, if it’s up to you to solve the problem, you’d want as few strings attached to the money you need just in case the first idea doesn’t work the way you’d hoped.

But it’s worth all of us taking a breather for a moment and considering how we got here and whether what we’re doing is going to improve the future.  In my estimation, without stipulating some sort of reforms in addition to the bailout, we are doing very little for our future much past the first ten years when such “superfunds” and mortgage-based investments will be highly unappetizing to “the market.”