Geithner Meets Our Lame-Ass Press
I listened to Geithner on This Week and Meet the Press this morning. On both shows Geithner contrasted his bank bail-out plan with two others: (1) doing nothing and just letting the market handle the banks and (2) buying all the banks' bad assets ala Hank Paulson. Sadly, neither of the interviewers (Stephanopoulos or Gregory) was quick enough or prepared enough to ask Geithner about a third option: receivership (or nationalization). So a huge opportunity to hear Geithner respond to Krugman's ideas was missed. Oh well, I guess we can't expect anything better from our lame-ass press.
Update: I should add that I got the impression that both Stephanopoulos and Gregory thought that Geithner was addressing Krugman's criticisms of the Geithner plan when, in fact, Geithner was completely avoiding discussing Krugman's ideas and was instead comparing his plan to two different alternatives that have nothing to do with Krugman's ideas: doing nothing and adopting Paulson's plan. Stephanopoulos and Gregory were therefore woefully unprepared for their interviews.
So Purple you think it was because Gregory wasn't 'quick enough or prepared enough'? I wish it was because of one of those 2 reasons. Team Obama, and their industry insiders, have made it clear that they don't want to talk nationalization so I believe it was an intentional error of omission by Gregory, being a representative of the corporate media which has a large financial stake in the economy, having nothing to do with his competence or his lack thereof...
March 29, 2009 1:18 PM | Reply | Permalink
You may very well be right Libertine. But honestly, I think you give our press far too much credit. I'm not sure they're smart enough to be that clever and conniving.
March 29, 2009 1:25 PM | Reply | Permalink
Geithner was of course only subtly misleading when he implied that Chap 11 mechanism is (1) doing nothing.
Despite the voters' anger at bailouts and bonuses, he thinks that throwing their money at any problem is a better solution.
It's clear why - the crisis needs to continue long enough to provide him with a policial cover to obtain the extrodinary new powers from Congress.
The asburdity of the plan to give more power to regulators who have so spectacularly failed to foresee or address the current crisis is beyond me.
But I am indeed amused by hungry obsession of some democrats to get their hands directly on these banks for the "temporary" nationalization.
March 29, 2009 1:32 PM | Reply | Permalink
Lalo, I was hoping we'd hear some discussion of nationalization and its alleged pluses and minuses. But Geithner avoided the topic and Stephanopoulos and Gregory let him slide so we learned nothing new. It would also have been interesting if our illustrious interviewers had challenged Geithner a bit on why his plan was truly better than doing nothing (which might for many of these institutions indeed mean Chapter 11) or on whether his plan was really any more than a more complex variant of Paulson's plan. But none of those questions were asked.
March 29, 2009 1:43 PM | Reply | Permalink
During the election campaign much of major media based their "reporting" on the fact-shits (also known as talking point memos) they were getting from the Obama campaign.
Why do you object to this practice only today?
March 29, 2009 2:00 PM | Reply | Permalink
Purple, thanks for this. Had missed the interviews. I saw Geithner on CNBC last week where he was asked about nationalization and simply didn't answer it. He avoids the N word like the plague. for understandable reasons. It would spook the markets at a time when he lacks the powers to efficiently handle a TBTF bank failure. I don't know what his intentions are, but whatever they are - bailout or nationalization - he is speaking exactly as I would expect him to speak.
March 29, 2009 1:37 PM | Reply | Permalink
Fair point Obey, and I myself am still undecided what's the best option. Krugman's arguments for receivership make a lot of sense to me, but I'm not sure his course is politically practical and I suspect Krugman ignores some of the potential downsides to receivership (mostly the effect on the stock and bond markets which could exacerbate some of our current problems, I think). I just tuned in to This Week and Meet the Press hoping to learn more and ended up feeling more like I just wasted a bunch of time.
March 29, 2009 1:53 PM | Reply | Permalink
Well, thanks for wasting your time for the rest of us. lol! ;0)
March 29, 2009 1:56 PM | Reply | Permalink
Any time, Obey! Especially since the alternative was doing my income taxes. Guess my choice was really between wasting my time hearing about the plan or wasting my money paying for it!
March 29, 2009 2:10 PM | Reply | Permalink
Yes, well, wasting time seems cheaper! So good calculation on your part ...
March 29, 2009 2:14 PM | Reply | Permalink
Well maybe I am giving them too much credit. I was more of the opinion that many of the decisions that the corporate media make on how to report the news are decided on levels waaaaaaaaay above Gregory's head. The future of GE's stock value hangs in the balance. I doubt those people would let a peon, a peon in the corporate hierarchy scheme of things, like Gregory cost them money...nationalization of banks isn't an option for them and won't be promoted on their network. I know, I know, I can come off as a tinfoil hat type at times. But I know one thing, being a business owner...that is I would never let any employee of mine jeopardize the profitability of my business. I am assuming the owners of GE are thinking the same way.
March 29, 2009 1:37 PM | Reply | Permalink
I think that's maybe why they hire so many dolts who can't ask real questions! They don't have to try to control Gregory and Stephanopoulos because there's nothing there to control. These guys aren't capable of doing the perceptive questioning and reporting that might challenge GE's profits. So GE can give them complete "freedom" without any fear of harm to their bottom line.
March 29, 2009 1:46 PM | Reply | Permalink
I don't disagree with you there...I have stopped watching, not that I ever watched them that often, the Sunday Morning news shows. It is mostly fluff and softball questions which lack any serious follow-up when the answers are, as they almost always are, divorced from reality.
LOL...I think with your take on Gregory et al that I was being overly deferential to him. You're probably right they have nothing to fear from Gregory. But I am an observer of how the news is reported just as much as what is reported...and there is a definite scarcity on the corporate airwaves of anyone even mentioning the nationalization option...never mind a serious discussion of the pros and cons of it. Some journalists they collectively are.
Very good post...
March 29, 2009 1:57 PM | Reply | Permalink
No tin hat, just an appeciation of today's American oligarchy:
http://www.theatlantic.com/doc/200905/imf-advice
March 29, 2009 4:03 PM | Reply | Permalink
Very good article by Simon Johnson...thanks for the link bluebell.
I wonder if MTP would have Mr. Johnson on as a guest in the near future? He was the head of the IMF and because of that I feel he has expertise to speak on the issues facing the US economy. But I'm not holding my breath that he'll be on the show...
March 29, 2009 6:30 PM | Reply | Permalink
Yes, false framing is rampant in politics. It's a shame the Obama Administration is not following through on the promise of Change and The Truth. Where is the real competition of ideas referenced by "team of rivals"? Where is the rivalry in the Administration, who is speaking up for alternatives internally? Where is Volcker and his impotent panel?
I have to wonder if nationalization/intervention (which are actually two rather different approaches as well) is/are not off the table but being purposely kept on the back burner for sound political and economic reasons. The alternative is that Geithner and Summers have in fact been seduced by Wall St. and are in the tank. I'd prefer to keep that as a talking point rather than accept it as a given. That is, I'd like to believe they are smarter and more free-thinking than they appear to be over the past few months.
Geithner proposes price discovery mixed with price inflation. On the surface it's insane, but maybe it's merely paradoxically powerful. It protects the firms' stock and bond holders and managements, but how many of them deserve protection and is it really a protection racket in reverse?
March 29, 2009 1:53 PM | Reply | Permalink
With all that's on the line, there are only two types of teams you can put together and expect to win; a team of rivals, or a team of unrivaled, and at present we have neither.
March 29, 2009 2:23 PM | Reply | Permalink
Dunno if that's true. Politics involves some false flagging, or what can be spun to look like that.
I don't have a problem with Geithner's plan if implemented as a probe, both politically and economically. I'm concerned about $1T of payments being involved. If he wants to run some small auctions at $100M-$1B, I'd support that (or at least not argue against it) as an experiment. We'd see how it went. If it gives good price discovery, great. It's not like this plan needs to be dumped 100% on the market this week, is it? And he should start with an insolvent bank, where the assets are already in the hands of the FDIC and need to be sold off. Sell them off with an FDIC loan component, see how it goes.
Starting with $1T means either the problem is actually many trillions or it's starting with too much.
The larger problem I have is that I think the "toxic assets are illiquid" business is partly (maybe largely) a smokescreen.
March 29, 2009 2:32 PM | Reply | Permalink
good post.
Never send the corporate press to do a journalist's job.
March 29, 2009 2:09 PM | Reply | Permalink
Monkey Face Gregory: So does this mean that rich guys like me and my friends will be ok and still live beyond the common folks' means?
Stephanpoopalous: So does this mean that us rich guys will still be safe like we were while Clinton was lewinskiized?
March 29, 2009 2:56 PM | Reply | Permalink
Since when does the administration need to "answer" to Paul Krugman?
March 29, 2009 5:42 PM | Reply | Permalink
Well, darn. . .exactly!
Forget about Krugman, tell ME. Speak to me as if I were a kindergartner. What does it all mean? Who gets what for that money? Who is watching out for that money? Tell me EXACTLY what you're about to do. Tell me EXACTLY what you've already done. Tell me EXACTLY why you're doing it the way you're doing it. And leave out the big words.
(Then I won't need Krugman, the Sunday Morning shows,or any other pundits to "help" me understand.)
March 29, 2009 5:55 PM | Reply | Permalink
LOL! Well said, Ramona. I like your spunk.
March 30, 2009 10:33 AM | Reply | Permalink
Who mentioned answering to Krugman here Jade? I can't believe the animosity some on the left have for Krugman, I assume just because he had the audacity to criticize the President's plan. The Audacity of Reality...
I agree with Ramona and Purple State. Purple State in the fact that the nationalization option is one many respected economists feel should be considered. Ramona is right too...I want to hear that question posed to Geithner. My taxes are going to bailout these companies and now we have a plan, one we are very uncertain will work, where more of my tax dollars are put at risk so that the 'Lords of the Universe' might be able to make enough money to singlehandedly save the economy...even if, as some economists note, it does nothing to address the core problem that it won't make many of the banks which are basically insolvent viable again.
March 29, 2009 6:40 PM | Reply | Permalink
I'll second that emotion!
March 29, 2009 7:38 PM | Reply | Permalink
Who mentioned answering to Krugman??
I think that's the point that was made by Purple State in the original post. Maybe you should re-read it.
March 29, 2009 8:18 PM | Reply | Permalink
I think both Stephanopoulos and Gregory thought they were asking Geithner to respond to Krugman since both quoted Krugman's NYT columns as they asked their questions to Geithner. What's sad, though, is that neither apparently understood Krugman's criticism well enough to notice that Geithner was not responding to that criticism. I think it would have been very useful to hear Geithner's reasons for not following the path of receivership or nationalization that Krugman (and many others) prefer. Stephanopoulous and Gregory were apparently prep'd to pursue that question. But they apparently didn't have strong enough command of the issue to ask the right follow up questions when Geithner veered away from the question. In fact, they didn't seem to even notice that Geithner had veered. That's sad when so much is at stake.
March 29, 2009 8:51 PM | Reply | Permalink
How can we get our questions onto the national scene in a more visible fashion?
March 30, 2009 12:06 AM | Reply | Permalink
When did Krugman become such an Oracle that the Treasury Secretary needs to respond to him when Geithner is doing the Sunday morning talk shows?
Krugman is one of the most partisan economists out there. He's famous for saying things like "Economists don't know how to make a poor country rich, or bring back the magic of economic growth when it seems to have gone away".
I am not trying to defend the Press. But it's disappointing to me that people expect Geithner to respond specifically to Krugman's writings.
It's almost as if people want another Cramer/Stewart but with Geithner/Krugman. That would be a mistake.
March 29, 2009 5:47 PM | Reply | Permalink
Why would that be a mistake? Do you think K would demolish G and thus lead to further catastrophes as a psychologically damaged Treasury became incompetent instead of merely drunk on Wall St's perfume?
K. calls for nationalization. I call for sanity in intervention. It's possible that G. is sane in this regard but working with and around political and economic obstacles.
Again, I'd like to see PPIP tried as part of an intervention, with the FDIC "lending" part of the purchase price to buyers of former bank assets. I think PPIP is a travesty as otherwise proposed.
March 30, 2009 12:20 AM | Reply | Permalink
I already stated why in my opinion it would be a mistake. I'm not sure why you're asking me again. I'd suggest you re-read it. It had nothing to do with the economics of the situation. It had to do with whether a single economist such as Krugman is owed a response on national TV from the Treasury Secretary.
March 30, 2009 6:30 AM | Reply | Permalink
"It's almost as if people want another Cramer/Stewart but with Geithner/Krugman. That would be a mistake."
I don't see your explanation of that alleged mistake unless you mean it's your own mistake for putting it that way.
March 31, 2009 6:34 PM | Reply | Permalink
My original post was pretty clear and your question was just to be antagonistic. What's your point?
And please answer my question about Citi. I'm still dying to know how it's so "obvious" that things would be so different if GLB was never passed.
March 31, 2009 9:50 PM | Reply | Permalink
How would a "smackdown" be a mistake or why would wanting that be a mistake?
April 1, 2009 12:07 AM | Reply | Permalink
Could you explain what you mean by a "smackdown"?
I'll try to explain my point again if you'll respond to my point about Citi and GLB.
April 1, 2009 5:25 AM | Reply | Permalink
Cramer/Stewart
You're poison, Bill. No thanks on your offer.
April 1, 2009 4:34 PM | Reply | Permalink
Poison? That's a new one. Thanks for the compliment.
This whole conversation has been deja vu to our illiquid asset conversation. I try to give you a real world example about Citi and you just say I'm wrong because it's "obvious". You take a pass on responding to my argument.
I will go back to ignoring your comments since you don't finish things you start.
April 1, 2009 8:11 PM | Reply | Permalink
Review the subthread. The topic here is your claim that it would be a mistake to want a Cramer/Stewart type confrontation with K and G, not about your inability to make a point re Citi.
You've been drinking your own poison. Don't.
April 1, 2009 10:20 PM | Reply | Permalink
You always say "review the subthread" and "I've already answered that". Just like with the illiquid asset discussion. All you said in this subthread was that it was "obvious".
This is exactly why I will once again stop responding to your posts.
You need to work on your tact and stop telling people that their responses make no sense. And while you're at it you could try to respond to counterpoints that are made on topics that you've raised in the first place.
You've asked questions repeatedly after I thought I answered it the first time. And I've tried to answer it again. But somehow you're above that.
April 2, 2009 6:08 AM | Reply | Permalink
No, Bill, you're still drinking your own poison here.
April 2, 2009 2:24 PM | Reply | Permalink
Blah blah blah. Don't bother to respond to my argument. Just continue to blah blah blah. Just change your name from eds to "blah blah blah". Don't bother to make arguments just say it's "obvious" or "poison". Blah, blah, blah
April 2, 2009 10:52 PM | Reply | Permalink
Your Citi "argument" is out of order here, again.
April 2, 2009 11:12 PM | Reply | Permalink
You're just afraid to respond to it. Probably because you don't have a good argument against it. So instead you just say I'm wrong because it's "obvious" and because you've already discussed it.
Nice try.
April 2, 2009 11:18 PM | Reply | Permalink
No, I don't say that. How are your comments here on topic and progressive?
They look to me to be entirely regressive and off topic. You're simply hanging onto what you hold to be some important point from some other thread and harassing me with that. Either deal with the topical question directly or just go away, Bill.
To remind you of the topical question in one form:
"How would a "smackdown" be a mistake or why would wanting that be a mistake?"
April 3, 2009 3:16 PM | Reply | Permalink
Actually you did say that. And you can go back and look it up. If you're too lazy to do so the link is below. Search for the word "obvious" and you'll get your pithy response
Even if I started a new post about Citi and the GLB Act you would still refuse to answer the question.
http://tpmcafe.talkingpointsmemo.com/talk/blogs/esaslaw/2009/03/changes-nobody-should-have-bel.php?ref=reccafe
April 3, 2009 8:07 PM | Reply | Permalink
In response to Jade and MCB-- a lot of people other than Krugman have suggested receivership or nationalization for the banks. Krugman may be among the most prominent of those calling for this approach but he's by no means the only one. And it is a tested approach (both in Sweden and here in the past), so asking Geithner to explain why it's not the approach he's taking now seems quite reasonable.
I also think it's good both to challenge the government and to expect the government to respond to challenges and explain their reasons for the policies they are promoting. That seems to be good for democracy. But then maybe we've all gotten too used to the Bush approach and think that asking questions of the government is unpatriotic and government officials who answer questions and try to honestly explain the reasons for their actions are weaklings.
March 29, 2009 6:01 PM | Reply | Permalink
I think it's fine for Krugman to have his opinion and I agree that others share it. But the way you phrased your original post implied that Geithner should respond to Krugman (ala Cramer responding to Stewart, or vice versa).
I agree it's a good opportunity for Geithner to respond to the concept, but that's a bit different than saying he should respond to Krugman.
March 29, 2009 8:20 PM | Reply | Permalink
Brave Purple. You waded into the swamp.
Banks that are "true" banks and not part of a conglomerate are being tested, declared insolvent and going through the FDIC process.
The other types of banks are like Citibank--part of the large conglomerate known as Citigroup. Geithner has explained ad nauseum that it is virtually impossible to separate out Citibank from all parts of Citigroup. There are overlaps and to take them over as the "true" banks requires taking over the conglomerate. He has asked for the authority to do this.
Now we get to the financial institutions that are not really banks--like AIG. In AIG the government held the equivalent of a majority share and apparently folks believe that this means that AIG can then abrogate legally binding contracts. Our legal system doesn't support that.
We need two things to get around this mess--ongoing supervision of financial institutions and the authority to take them down as we do the "true" banks. This would allow the interconnections between subsidiaries and across national boundaries to be untangled in a less catastrophic manner--or, at least, that's the hope. This isn't a new problem--even in Sweden the banks have consolidated after their meltdown in the 1990s and they have the same sort of institutions.
It was certainly clear in that interview that Geithner would have liked that legal authority before the AIG meltdown and rescue.
I understand the risk with the moral hazard and too big to fail argument. But I also think we could limit the fallout in the current crisis by only taking out those financial institutions who are really insolvent--and giving our executive branch the Congressional authority to take them over.
Explain to me the Krugman argument on taking over solvent financial institutions in the midst of the current crisis.
March 29, 2009 6:48 PM | Reply | Permalink
"Geithner has explained ad nauseum that it is virtually impossible to separate out Citibank from all parts of Citigroup. There are overlaps and to take them over as the "true" banks requires taking over the conglomerate. He has asked for the authority to do this."
I don't believe he "explained" really, rather he takes this position repeatedly. A good explanation would not require ad nauseam or ad infinitum. But let's take him at his word that there is some true problem.
Why does he, or FDIC et al, not have the power to slice and dice Citi already under existing banking laws applying to Citibank qua bank? I find it farfetched that hiding a bank in a holding company was not foreseen by regulators. So what's the real issue here?
Or is the problem not really the "overlaps" but that Citigroup ex Citibank is the real problem? That is, Citibank could be a piece of cake for the FDIC but Citigroup is otherwise rotten in many respects. If so, then additional authority would be needed to intervene. But I'm not getting this impression from my careless readings.
March 30, 2009 1:08 AM | Reply | Permalink
Reading about the Washington Mutual lawsuit should be instructive, eds. Even Krugman mentions BofA and Citi so I suspect you have not picked up the sublety used to refer to those entities in trouble.
Just ask yourself if you owned a business with part of it regulated and inspected to the nth degree, would you not hire the best and the brightest to ensure you kept as few assets as possible on that side?
With the exotic "deals" we've all been treated to, I can imagine that a few of our best and brightest have structured contracts and deals in such a way that the assets appear to remain firmly in the hands of the non-regulated wizards.
AIG is instructive, I think. An insurance group with a very high credit rating became the target of a group who eventually formed the Financial Products subsidiary. This group used the insurance side to bolster their sales and to escape all regulation.
Let's close that particular loophole.
March 30, 2009 11:28 AM | Reply | Permalink
"Just ask yourself if you owned a business with part of it regulated and inspected to the nth degree, would you not hire the best and the brightest to ensure you kept as few assets as possible on that side?"
No. But I'm a born-again moralist so I probably wouldn't engage in shadow banking in the first place.
I would call what you describe above "criminally immoral conduct". It's one thing to take legit income tax deductions, it's another to create evil tax shelters, for instance.
I've also worked in areas supervised/regulated by the FDA, so I have at least a clue about regulation. I understand that people will try to use loopholes for good or evil.
March 31, 2009 1:32 AM | Reply | Permalink
I'm all ... ok, not all, part :-) ... in favor of nationalization. Let's take over these insolvent institutions, break them up, and sell off the pieces. Here's the funny part though: one of the pieces we will have to sell off is a "toxic asset". How do you propose to sell it off? Perhaps a PIPP will do the trick....
In other words, we may still need the Geithner plan, just as part of nationalization.
March 29, 2009 7:52 PM | Reply | Permalink
Well that might be the best course of action but if that plan isn't going to be part of the public discourse of 'what to do' it won't be done...and I think that is the point that Purple is trying to make. The media is just plain awful. They are supposed to be the people's watchdog in terms of what our government is doing and not only do they seem to be not up to that task they seem to be in bed with the people they are supposed to be keeping an eye on for us.
March 29, 2009 10:38 PM | Reply | Permalink
Libertine gets it right. What we need is a healthy national discussion of all the options and all the pluses and minuses of those various options--what we didn't get, if you remember, prior to the Iraq war. Here we have another very significant policy being adopted by the government and the press again isn't capable of asking the right questions to force government officials to explain in detail what they're doing and why what they're doing is better than other options.
March 30, 2009 7:07 AM | Reply | Permalink
(er, PPIP ... can't typppe today :-) )
March 29, 2009 11:02 PM | Reply | Permalink
Well if that is the plan no one is talking that way. Why is the concept of temporary nationalization, and the probable subsequent break ups, of failing banks being discussed? Obama and his Treasury Sec'y need to be made more forthright on their long terms plans for the economy. How can there be a informed discussion if we don't know what the plan is? The administration needs to be more transparent in how they are handling the economy...it seems like public policy on this issue is being decided on behind closed doors by a VERY small group of people...all other opinions be damned. That to me is anti-democratic.
March 30, 2009 12:49 AM | Reply | Permalink
My bad...s/b;
"not being discussed"
March 30, 2009 12:53 AM | Reply | Permalink
Not nationalization!!!!
Intervention or receivership, please.
But yes, I've been calling for using PPIP on assets held by the FDIC, that is to try to sell off assets. The FDIC is the ONLY entity I recognize which rates trying to do G's price inflation qua price discovery trick borrowed from Pimco.
Doint PPIP for banks is both a giveaway to those who should take haircuts AND insane as "price discovery".
March 31, 2009 5:30 PM | Reply | Permalink
Just some clarification as I read some of the responses. I am not at this point clearly in any camp on this issue. In fact, I listened to Geithner this morning specifically because I wanted to hear him make a strong case for his approach and for why it's better than the approaches that his strongest opponents recommend (nationalization on the left, chapter 11 on the right). What disappointed me is that the press failed to force Geithner to say anything enlightening. I wanted to learn something to help me make up my currently un-made-up mind. I didn't get the information from the talk shows.
March 29, 2009 8:57 PM | Reply | Permalink
I haven't expected much from Gregory ever since he thought it was cool to dance with Karl Rove at that White House Press corps dinner. George used to be pretty good when he worked for Clinton, but he is sometimes disappointing in his question asking. He is the one who used Hannity's nonsensical question about Bill Ayres after all.
Krugman is not the issue - the issue is getting Geithner to talk more about his arguments against nationalization.
March 30, 2009 11:30 AM | Reply | Permalink