Trailer and video from Whit Stillman's Barcelona.

Strange to be cheering on White House economists, but I really do hope these people are successful. Most people admit they don't know what will happen, which on one hand is unnerving, but on another it means they will be willing to try different approaches. It's also good to hear they understand speed is of the essence. Reagan and Clinton didn't fully enact their big economic packages until August. Obama and his propellerheads got it done in a month. From the New York Times:

Sometimes, during the 30-minute briefings that Mr. Summers delivers in the Oval Office nearly every day, Mr. Obama addresses him as Professor, as in, "What do you think, Professor Summers?" Sometimes, as he did in the Roosevelt Room one recent afternoon, Mr. Obama tweaks him and his fellow policy wonks, dubbing them "the propeller-heads."

This, senior White House officials say, is the president’s way of ribbing Mr. Summers, who is back in Washington - he served as Treasury secretary under President Bill Clinton - in the role of what his new boss calls a "thought leader."


...
"The irony is that Summers and Geithner wrote the textbook on how to manage these crises, and they lectured countries all over the world on what to do," said Adam S. Posen, deputy director of the Peterson Institute for International Economics, lamenting that they did not "follow through with their own prescriptions."

Mr. Summers dismissed the criticism, maintaining that the bailout plan, for which he said Mr. Geithner would announce details in due time, was "tough and ambitious."

In the meantime, Mr. Obama’s chief propeller-head is on to other matters, like housing and huddling in the Roosevelt Room to plan the budget with the president, as he did on Friday, when Peter R. Orszag, the White House budget director, passed out propeller-head hats.

Ian McEwan writes about John Updike.

What I like about Obama going around the country promoting the Stimulus bill is that it shows he's not afraid. Here's the very funny Dave Chappelle joking about being the first black President.

Fareed Zakaria writes about our neighbor to the north Canada:

Guess which country, alone in the industrialized world, has not faced a single bank failure, calls for bailouts or government intervention in the financial or mortgage sectors. Yup, it's Canada. In 2008, the World Economic Forum ranked Canada's banking system the healthiest in the world. America's ranked 40th, Britain's 44th.

We should probably follow their example regarding how they set up their healthy banking system and while we're at it take a look at their health care system.

I vote we skip right to the Swedish Model

Brad DeLong has some notes on the Geithner Financial Rescue Plan:

...

7. The net effect might be that fears that banks are insolvent or will become illiquid will ebb.

8. And the financial crisis and the Bush depression will come to an end.

9. But Geithner said this is not the end--that if the TARP money is expended and if banks still fail their stress tests, then what...

10. This plan does not foreclose a resort to the Swedish model, it is instead an attempt to use the TARP money to escape the necessity for adopting the Swedish model.

Jacob Sullum writes about the next Drug Czar, former Seattle police chief Gil Kerlikowske.

Executives from the financial institutions who received funds from the $700 billion banking bailout faced their critics on the House Financial Services Committee yesterday in Washington. The chief executives at the hearing were: Kenneth D. Lewis of Bank of America, Robert P. Kelly of Bank of New York Mellon, Vikram Pandit of Citigroup, Lloyd C. Blankfein of Goldman Sachs, Jamie Dimon of JPMorgan Chase, John J. Mack of Morgan Stanley, Ronald E. Logue of State Street, and John G. Stumpf of Wells Fargo - CEOs from the too-big-to-fail banks essentially.

Instead of facing a firestorm, as the regulators at the SEC recently did, they got a "slow burn." One wonders if this happened because the banks are about to endure a "stress test" or because the critics have major employers in their districts who are on the hook to these banks. Maybe they even get campaign contributions from employees of these banks. Even though they were part of the problem, no doubt these CEOs will have to be part of the solution, so perhaps the critics were "looking foward" as Obama would say. Probably it's all of the above.

Robert Reich writes about perp walks at Congress at his blog:

When in 2005 Yahoo surrendered to Chinese authorities the names of Chinese dissidents who had used Yahoo email, and Google created for the Chinese a censored version of its search engine (removing such incendiary wordsa s "human rights" and "democracy," many Americans were outraged. Executives of both companies were summoned to appear before the House Subcommittee on Human Rights. Christopher Smith [(R-NJ)], its chairman, accused Yahoo of entering into a "sickening collaboration." He ridiculed the firm’s avowed justification for revealing the names of dissenters, saying if Anne Frank had put her diaries on email and Nazi authorities wanted to trace her down, Yahoo might have complied if Yahoo’s email system had exposed Nazi Germany to American culture. The late Tom Lantos, a leading Democrat on the committee and the only Holocaust survivor in Congress, asked the assembled executives "are you ashamed? Yes or no?" He called their behavior a "disgrace" and asked how they could sleep at night. James Leach, a Republican from Iowa, accused Google of serving as "a functionary of the Chinese government," adding that "if we want to learn how to censor, we’ll go to you." Smith subsequently introduced a bill to prevent American companies from, among other things, cooperating with censorship, but no one expected it to pass, and neither Smith nor any other member of congress pushed for it.

Perp walks like these may serve a useful public function. Rituals of public shaming are not inconsequential. But they're no substitute for laws and penalties that prevent the conduct in question from recurring.

You have to wonder if Yahoo and Google helped John Poindexter with his - now defunct - Total Information Awareness Program. Hopefully Obama and the new Congress will get tough with laws and penaltites.

Another intelligent guy I would include in my economic crisis rogues gallery along with Robert Samuelson is the blogger Mickey Kaus. He's on a permanent jihad against things like unions, welfare, immigration reform - you know, stuff that would help out the little people suffering during a global economic downturn.

Not sure what to make of the Israeli election. Steffi Graf won the most votes, but Bibi Netanyahu is claiming victory since rightwing coalition parties won the most votes.

Avigdor Lieberman, the ultranationalist, did well on a weird platform, combining a secular attack on the religious - proposing civil marriage for instance - and a vigorous scapegoating of Arab Israelis, the "enemy within."

On this day in 1809 Abraham Lincoln was born to Thomas Lincoln and Nancy Hanks, two uneducated farmers, in Kentucky and Charles Darwin was born to wealthy society doctor and financier Robert Darwin, and Susannah Darwin (née Wedgwood) in Shrewsbury, Shropshire, England.

I believe the first time I read this fact was in Hitchens's bestseller God Is Not Great: How Religion Poisons Everything. Adam Gopnik recently had a book come out on Darwin, Lincoln, and Modern Life.

To honor this happy coincidence I'm having a super blogfest.

Robert Samuelson comes to mind as someone who's usually either picking on old people over Social Security or picking on "pampered" European workers or ginning up generational warfare on behalf of the well-to-do. But the economic crisis has him writing some relatively decent columns here, here, here, and here which contradict much of what loony-tunes GOP politicians are arguing.

In his columns, Samuelson "talks the economy down" and engages in much-derided "fear mongering":

This democratic (with a small "d") despondency has many causes. As more Americans invested in stocks, more became exposed to the market's wild psychological and financial swings. The plunge in home values has made many workers with secure jobs poorer. And, of course, layoffs themselves have become more democratic. Once, the young and blue-collar workers bore the brunt of firings. Now, managers, investment bankers, journalists, scientists - almost anyone - can be canned. Age confers little security. In December, almost a third of the jobless were 45 and over.

What offends middle-class Americans, most of us, is economic capriciousness. People crave order, predictability and security. They want to believe that personal virtues of studying, working hard and planning will be rewarded in the marketplace. Even in good times, these ambitions are often frustrated. But in today's economy, the disconnect has widened. Setbacks and losses seem increasingly divorced from personal effort. Our whole values system seems besieged.

I'd just add that throughout his career Samuelson has argued against public policy that mitigates all of this.

Brad DeLong, who has an excellent memory, notes one of Nouriel Roubini's gloom and doom scenarios didn't come to pass:

Roubini and Setser, February 2005 http://tinyurl.com/dl20090207: [In the early 2000s] The Federal Reserve responded aggressively to the sharp falls in US equity markets, and the Bush Administration added a massive fiscal stimulus to the Fed’s monetary stimulus: as Ken Rogoff (2003) has noted, the US recovery was the best recovery money could buy.... [F]oreign central banks were unwilling to let their currencies fall against the dollar, and intervened massively... a seemingly unlimited credit line from the world’s central banks funded the expansion of the US fiscal deficit, preventing the growing stock of Treasuries from crowding out private investment....

A cooperative grand bargain... offers the best chance for unwinding of the US external imbalance without a sharp deceleration of US and global growth. However, such a bargain looks increasingly unlikely.... China may be willing to add $240 billion, or even $300 billion, to its reserves for another year. We doubt it will be willing to do so for two more years.... [T]he risk [of] a disorderly unraveling... a sharp correction of the US dollar and of the US bond market, a surge in US long-term interest rates, a sharp fall in the price of a wide variety of risky assets (such a equities, housing, high-yield bonds, and emerging market sovereign debt) - are growing. Such an unraveling could result in a sharp economic slowdown in the US. It will force countries that now depend on US demand growth for their growth to adjust as well...

Tax, Not Shame

Reed Hastings, founder and CEO of Netflix and a Democrat, had an Op-Ed in New York Times opposing Obama's plan to cap the executive pay of those managing financial institutions receiving public largesse in order to get credit moving again and prevent a decades-long slump.

Instead he proposes executives like him be taxed of half their wealth instead of a third. Fine.

In the meantime, Obama's plan seems like a good idea. Says Hastings:

Another advantage is that it would also cover the sometimes huge earnings of hedge fund managers, star athletes, stunning movie stars, venture capitalists and the chief executives of private companies. Surely there is no reason to focus only on executives at publicly traded companies.

This week, President Obama proposed imposing a $500,000 compensation cap on companies seeking a bailout. It’s a terrible idea. We all want the taxpayers' money returned, and capping compensation at bailout recipients will just make it that much harder for those boards to hire and hold on to the executives who can lead their companies to compete and thrive.

Perhaps a starting place for "tax, not shame" would be creating a top federal marginal tax rate of 50 percent on all income above $1 million per year. Some will tell you that would reduce the incentive to earn but I don’t see that as likely. Besides, half of a giant compensation package is still pretty huge, and most of our motivation is the sheer challenge of the job anyway.

As Dr. Evil would say, right...

I just don't see a tax increase as politically feasible at the moment, maybe when the economy picks up. My points to Hastings would be:

1) the boards of the companies in the financial market got us in the position we are in, so who cares if they have a tougher time hiring and holding competent executives. They can't do much worse than they've done already.

1a) star athletes, stunning movie stars, venture capitalists and the chief executives of private companies didn't get us into this mess and their industries aren't being bailed out by obscene infusions of public money. Yes hedge fund managers played a substantial role but there is already talk of regulating them.

2) executive positions at companies backed by the government - essentially saved by the government and the taxpayer - will be more desirable than at companies no one trusts. Especially if you figure in his point that executives are mostly driven by the sheer challenge of the job.

3) If he had proposed that once the economy recovers, pay caps should be removed and taxes increased, I wouldn't suspect his motives. But since he doesn't, I will never be using Netflix, not that he would care.

Lux Interior of the Cramps passed away.

What I hope Obama is most bipartisan about is maintaining and improving the good relationship Bush developed with India. The south Asian nation is fast becoming an essential democracy and important part of the global economy. What is making India nervous is the prospect of internationalizing the conflict in Kashmir, so America and our allies will need to be most delicate about that.

Floyd Norris writes that "the countries that opened the most to the international capital markets, and that sought to bring in business with relatively lax regulations, now are suffering the most. Iceland was the wonder economy of the world; now it is broke."

Kenneth S. Rogoff, the Harvard economist, noted at the International Monetary Forum in Davos, Switzerland, last week that India, which has "comparatively stringent restrictions on international capital flows," also seemed to have the most optimists and seemed to be in line for economic growth in a year when few countries are.

"Thank heavens for the strong regulatory framework we have in our financial system," he quoted one Indian corporate executive as saying.

Meanhwhile on the homefront, instead merely offshoring work to help it deal with the economic crisis, IBM is attempting to offshore workers:

Big Blue is offering its outgoing workers in the United States and Canada a chance to take an IBM job in India, Nigeria, Russia or other countries.

Through a program dubbed Project Match, IBM will help interested workers whose jobs are on the chopping block to "identify potential opportunities in growth markets and facilitate consideration by hiring managers in those markets," according to an internal company document obtained by CNN.

The company also will help with moving costs and provide visa assistance, it says.

What companies like IBM are finding is that they like the low labor costs, but don't like the lower quality labor or work they are getting in return.

In related news, A.Q. Khan was set free. Say what you want about Musharaff - and I think it was good he was pushed off the stage, relatively peacefully - at least he kept that guy under house arrest. Holbrooke has his work cut out for him and we here at Negative Outlook? wish him the best.

What Say You? (@ the centrists in Congress)









A reliably brilliant piece on the economic mess by Doug Henwood titled "Gloomy, w/ a 15% chance of depression". He always includes great photos of the major personalities involved.

LBO has often described the U.S. economy by invoking the old Timex watch slogan from the 1950s, "Takes a licking and keeps on ticking." Crash follows upon panic follows upon bust, and yet the thing keeps getting up again to binge some more. These remarkable feats of renewal, though, have always come with big help from the U.S. government, either multibillion dollar bailouts or long rounds of indulgent monetary policy from the Federal Reserve. But revive it always has, despite the forecasts from the hard left and the hard right that this time it was different and the medicine just won't work.

Will it work again? Will the megadoses of stimulus do the trick? Or is the jig up? Will what’s widely touted as the greatest financial crisis since the 1930s be a prelude to Great Depression II?

As this is written, the punters on the Intrade betting site - who have an uncanny history in predicting elections - are giving depression a 15% probability. That seems about right. [Note added for web: the value of the web contract soared in the weeks after these words were written. As this note is added, the contract is at 53. That seems too high, but you never know, do you?]

Also, an interview with Henwood by Steve Perry.

Henwood has a new blog where he writes in typical literary fashion:

The IMF, which was off the scene for many years, is, like a vampire salivating at sunset, returning to action. It's already developed a program for Iceland, which is being put through the austerity wringer; apparently being white and Nordic doesn’t earn you an exemption. It's likely to lend some money to some countries that it deems virtuous on easy terms - among them Brazil but not Argentina. More on all this in the coming weeks.

I agree with Martin Wolf of the Financial Times that IMF reform is needed in the medium to long term.

Paul Krugman notes that Obama has ratched up his rhetoric:

Now, in the past few days I've heard criticisms of this plan that echo the very same failed theories that helped lead us into this crisis - the notion that tax cuts alone will solve all our problems; that we can ignore fundamental challenges like energy independence and the high cost of health care and still expect our economy and our country to thrive.

I reject that theory, and so did the American people when they went to the polls in November and voted resoundingly for change. So I urge members of Congress to act without delay. No plan is perfect, and we should work to make it stronger. But let’s not make the perfect the enemy of the essential. Let’s show people all over our country who are looking for leadership in this difficult time that we are equal to the task.

Larry Summers warns "deflation is a real risk for the economy."(again, noted by Krugman).Despite all of this I am much more Pollyannaish than Henwood or Wolf or Krugman. Maybe it's a generational thing, although I wasn't much surprised by the crisis after years of neoliberal-Republican misrule, unlike say Bush or McCain or Phil Gramm were.

Brian Beutler writes:

If you’re of the opinion that the events of the past several days are parts of a shrewd political gambit that will ultimately result in the best stimulus package we ever could’ve hoped for, this post isn’t for you. If you’re not, here’s how a motley assortment of folks think the effort can be salvaged.
...
What say you?

I say nay! Obama admitted making mistakes over the nominees, it's not a big deal. If you get tons more of those, then it's death by attrition of course.

Obama has repeatedly publicly said that the American people did not like how the Bush TARP plan was enacted. So they're fighting that and may have to give a little more than they would have liked. (In classic Republican fashion the Republicans have sort of sabotaged the cause, but it's "salvagable." At least Bush passed something which probably gave the economy some breathing space, and I seem to remember at the time certain liberals not wanting to pass anything and to put it off. Some of us have a memory.)

This isn't do or die time for Obama. It's do or die time for centrist Republicans and Blue Dog Democrats.

It's Obama who's inquiring of them: What say you? WHAT SAY YOU?

If they fail the test, they'll suffer the consequences.

Lindsay Beyerstein took photos at a Geoghegan event. She was hired by the Washington Independent as was the highly intelligent David Weigel.

Hackers Crack Into Texas Road Sign, Warn of Zombies Ahead

It happened in Austin, near the University of Texas. I lived in Austin in the early '90s and it's a great town and sort of a mini Silicon Valley. While I had a job in Austin, there was an economics professor at the univerisity whose classes I would audit. He had printouts of Clash song lyrics up on his office door (see below). I remember he also had stacks of BusinessWeek, a great magazine.