January 18th, 2009

A Fortiori: Price Controls and
the lingering odor of Reagan

Posted in 2008 Elections, Money by ed

FINANCE

1.  Oppenheimer analyst Meredith Whitney, now celebrated for calling Citigroup a spade in 2007, displeased people early this new year by predicting over $40 billion in further writedowns by the big banks in the first half.

2.  A week later:

(a) Bank of America, which TV had delcared this past fall a survivor (along with Wells Fargo and JPMorgan Chase), disappoinrts by touching up Treasury and the Fed for another $120 billion (20 in cash and 100 in guarantees) in order to close its fire-sale buyout of Merrill Lynch.  Merrill, recall, went under for being loaded with mortgage bonds; and BoA is blaming December writedowns on those assets for the newly discovered black hole.

(b)  Citigroup announces a plan to give the appearance of dismembering itself, into a Good and Bad bank.  The Bad will contain the marketless structured finance assets at which the feds have already thrown approximately $350 billion in cash and guarantees.  (A measure of how much good has been thrown at the Bad: all of Citi’s common stock could have been bought this past Friday for about $23 billion.)

3.  This same week, foreclosure data for December indicate the trend is still accelerating.

Thus a fortiori:  The need now for PRICE CONTROLS on the wounded segments of the structured finance universe.

(Bernanke, during his first round of TARP salesmanship in October, spoke of a “hold-to-maturity price” for Trouble Assets the program might buy.  That notion would be the basis of a price control regime — ie, valuation based on current and best-guess future PERFORMANCE rather than (non-existent) market value. )

POLITICS

I’m happier with the choice of Larry Summers to head the White House economic team than I was when his name was first floated at Treasury.   He seems in a mood to ream people in high places.  Good.

As for Geithner …  He was part of the problem at the NY Fed.  I don’t understand why Obama thinks he’s golden.  Esp in light of his problems paying taxes.  To tell the public (as this does) that anyone is crucial to New England here is to encourage a kind of superstitious obscurantism about finance.

It seems, rather, that the balls-to-the-wall defense of Geithner has mostly to do with the felt need at Team Obama to ride into DC on a steamroller. Acknowledging that the choice of Geithner was a mistake would blunt big mo.

The choice of FINRA’s Mary Schapiro for SEC is similarly tainted (another top regulator of the current mess) and uninspiring.  I guess they needed a woman and were running out of slots.  Eliot Spitzer was the obvious Change candidate here.

Geithner didn’t pay $34,000 in taxes in two recent years. Spitzer transacted with prostitutes. The defense of Geithner sends an odd message.

The Lincoln train from Philadelphia this weekend, the Lincoln bible coming Tuesday, all seem a bit much — and inapt, in that as Lincoln arrived in the city it was clear near and far that it meant civil war.

(Lincoln was for Unity in the odd sense of being able and willing (after the Free Soil compromise broke) to divide the nation and imperil the state as never since or before over the issue of slavery — which he discussed during his campaign and presidency by talking about Preserving the Union.   I admire him for all of this, and merely wish to point out that he was not about Unity.)

The theme of Obama’s inaugural address is said (on the Sunday talk shows) to be Personal Responsibility and a Call to Sacrifice.  This (again) sounds like Reaganite marketing materials.

Our woes were not caused by irresponsible working class Americans. Most Americans have been sacrificing time and quality of life since the advent of Reagan.

Why then will we be getting this lecture?   Is it (inapt) Cosbyism, aimed at malingering black american males?  If so, it’s way too personal.  Or will it prove to have been a roundabout way to target the rich (with targeted sacrifice)?  Or, most likely, a way to begin watering the rhetoric of the campaign down into middle-of-the-road policy that will do little to address the economic warfare practiced by the owner class upon the working class since the advent of Reagan?

The black woman chosen to read a poem at Obama’s inaugural is telling the tube that Whitman was a poet of “diversity.”   No he wasn’t.  He was the precise opposite — the most potent expressor of universality and American melting-pot newness we have ever had.  But since one in a thousand TV viewers have ever read more than a wisp of Whitman …

Reaganism and the Identity Politics it provoked both need burying.  It remains a question if that’s what Obama’s about.  Indications so far are boxing the compass.

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One comment

  1. Ilidas says:

    Welcome back, Ed., and happy New Year.

    You’ve some nice ruminations here. I, too, would like to see Spitzer return to public life — specifically, to the kind of civil service he was so good at as Attorney General and, later, governor of New York.

    Obama should bear in mind, as you note, that “[o]ur woes were not caused by irresponsible working class Americans. Most Americans have been sacrificing time and quality of life since the advent of Reagan.”

    January 18th, 2009 at 3:19 pm

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