Double reverse Stockholm Syndrome

One of the advantages of having too much work is that it is difficult for me to knee-jerkingly react to things throughout the day. It allows me to ruminate before I bloviate...and that's a good thing.

Anyway, it has been alternatively depressing and amusing to watch the anger and see the declarations of liberals Who. Will. Never. Vote. For. That. Man. Again. I mean, check out the comments here. I've seen teenage girls react more calmly to being disinvited from the mean girls' table at the cafeteria. I too was...unsurprised... by the announcement of "the deal" last night. But as smarter observers have pointed out throughout the afternoon, rather than Obama being held hostage and cozying up to his captors, Republicans may have been held hostage to their devotion to preserving the wealth of the rich.

Blinded by estate tax sugarplums, the GOP gave Obama something he -- and the country -- desperately needs: more stimulus for the economy. Now, yes, this is not the greatest form of that -- frankly, I don't know what the rich will do with their $700 billion, but it won't go to repairing crumbling bridges or ya know, hiring anyone -- but it is something that the GOP would otherwise refuse to give Obama. They want the economy to limp along for two more years. They want him to fail. But, like Pavlov's dogs, with the prospect of getting a tax break for the Koch brothers the GOP's drool got in the way of their obstructionism.

And for those who would have preferred Obama "stand and fight" and refuse to accept such a deal, please contact Chuck Schummer, Joe Lieberman, that dick from Nebraska, and the other Democratic senators who opposed letting the cut expire for their key constituents on Wall Street. The House bill restoring the cuts for the "middle class" and letting them expire for the wealthiest did not have the votes to overcome the threat of a filibuster in the Senate.

Oh, and ask someone who has been unemployed for more than a year what they think about the restoration of unemployment benefits.

So, now. Let's fix the tax code to make some dent in the wealth disparity in this country. A clever enough plan will surely fool the Republicans -- they may be brilliant when it comes to political bullying, but math ain't their strong suit.

They own us, and they used our money to make the purchase

Well, this is basically moot, but I was struck by a couple of stories the past two days. Yesterday, Gretchen Morgenson could barely conceal her rage.

HOW the truth shines through when you shed a little light on a subject.

Such is the message from the massive document drop the Federal Reserve made last week. The Dodd-Frank law forced the Fed to disclose the recipients of $3.3 trillion from emergency lending programs put in place during the crisis days of 2008, so the taxpayers who paid for those rescue efforts now know whom they were helping.

Not that we should expect to receive any thank-you notes from these institutions for rescuing them from themselves.

Still, it’s good to know who got what at the bailout banquet. This helps us understand how expensive it is to live in a nation where big, politically interconnected financial institutions are not allowed to fail — even after they mess up in the most catastrophic of ways.

The Fed data showed that the biggest recipient of taxpayer assistance was, naturally, Citigroup. It was followed closely by Morgan Stanley, Merrill Lynch and Bank of America. Goldman Sachs was also a large beneficiary during the darkest moments of 2008.

Remember that the Wall Street firms were imperiled by their excessive use of borrowed money, which generated huge paydays when the cost of those funds was cheap and the values of the assets they were buying were rising at a steady clip. After the bubble burst and financing evaporated, the firms were able to tap into a lending program created by the Fed in mid-March 2008 after Bear Stearns collapsed. It was called the Primary Dealer Credit Facility.

The program allowed firms to borrow at low interest rates — ranging from 3.25 percent when the program began to 0.5 percent when the last loan was made in May 2009. The firms had to post various securities as collateral when they borrowed, and some of those securities were risky indeed.

[...]

All of the emergency lending data released by the Fed are highly revealing, but why weren’t they made public much earlier? That’s a question that Walker F. Todd, a research fellow at the American Institute for Economic Research, is asking.

Mr. Todd, a former assistant general counsel and research officer at the Federal Reserve Bank of Cleveland, said details about the Fed’s vast and various programs should have been available before the Dodd-Frank regulatory reform law was even written.

“The Fed’s current set of powers and the shape of the Dodd-Frank bill over all might have looked quite different if this information had been made public during the debate on the bill,” he said. “Had these tables been out there, I think Congress would have either said no to emergency lending authority or if you get it, it’s going to be a much lower number — half a trillion dollars in the aggregate.”

Better late with the data than never, of course. And the release of these figures just ahead of Friday’s grim employment data — the jobless rate rose to 9.8 percent in November — makes them even more compelling. Clearly, the federal government was much more willing to deliver mountains of money to big banks that made big mistakes than it was to lend a financial hand to rank-and-file Americans struggling through foreclosures.

Federal officials have always argued that plowing money into errant banks and trading shops was the best way to rescue the economy, but to Edward J. Kane, professor of economics at Boston College, details of the Fed’s largess are reminiscent of a famous Winston Churchill quotation.

“Never have so few owed so much to so many, and given them so small a return,” Mr. Kane said. “We see, for example, how little these institutions have given back to troubled homeowners whose houses are threatened with foreclosure.”

[...]

From Sept. 15 through the end of that month, borrowings averaged around $100 billion a day. The interest rate charged on those loans was 2.25 percent.

Given that markets were frozen at that time, and given the dubious quality of some of the collateral posted to the Fed to back the loans, an interest rate of 10 percent would be a reasonable benchmark for measuring the size of this subsidy.

On the one hand, Citigroup, Barclays, Morgan Stanley, Goldman and the others paid roughly $75 million in interest over that September fortnight. Had the Fed charged 10 percent, the firms would have paid about $325 million. For just those firms, over only that period, that’s a $250 million subsidy.

And today...well, the juxtaposition is striking, to say the least.

Worried that lawmakers will allow taxes to rise for the wealthiest Americans beginning next year, financial firms are discussing whether to move up their bonus payouts from next year to this month.

At stake is a portion of the hefty annual payouts that are a familiar part of the compensation culture on Wall Street, as well as a juicy target of popular anger. If Congress does not extend the Bush-era tax cuts for the highest income levels, a typical worker who earns a $1 million bonus would pay $40,000 to $50,000 more in taxes next year than this year, depending on base salary.

Goldman Sachs is one of the companies discussing how to time bonus season, according to three people who have been briefed on the discussions. Pay consultants who work with major Wall Street companies say that just about every other large bank has also considered such a move in recent weeks.

The banksters are worried about unseemly appearances...so they say.

With tax politics in Washington unpredictable, bank executives have spent months sketching out several options for their bonus plans, including the possibility of an earlier payout. Lawmakers have been trading accusations across a partisan divide, but after this weekend, it appears likely that a compromise will extend the tax cuts for all income levels.

Even so, the banks’ discussions about bonus timing underscore how focused the industry is on protecting every dollar of pay.

[...]

The top five Wall Street firms have put aside nearly $90 billion for total pay this year, and they are expected to raise that amount using their end of year earnings. That would make this year one of the best ever for bank pay.

So, let's be honest. Populist rage aside, that $250 million subsidy the banks received through artificially low rates is chump change.

Expiration date

Daniel Gross details the five things you need to know about the "debate" over the temporary Bush-era tax cuts.

1. They were designed to expire by the same people now wanting to extend them for the wealthiest 2% of Americans;
2. Republicans, when in control of the Exec and Legislative branches did nothing to make them permanent;
3. The same Republicans and some Dems who want to extend the cuts for the wealthiest 2% of Americans are constantly whining about the deficit*;
4. Raising taxes** on the "investor class" won't kill the economy. In fact, the economy's been zombie-like for the past ten years, since the implementation of the temporary Bush-era tax cuts;
5. Erasing the expiration dates requires legislation; Republicans don't want the Democratically-controlled legislature to legislate; so, the tax cuts for everybody are likely to expire.

* UPDATE 1: The same people who brought you two wars and an unfunded expansion of Medicare, costing, literally, trillions

** UPDATE 2: That would be marginal tax rates, I forgot to mention.

"Who do you side with?"

Nancy Pelosi is made of steel.

Speaker Nancy Pelosi tonight implored House Democrats in a private meeting to consider a pre-election vote on extending the Bush-era tax cuts for the middle class while letting those for the rich expire, framing the debate in partisan terms.

Rep. Sheila Jackson Lee told TPM after the caucus that Pelosi ended the meeting with a "resounding" and impassioned speech that fired up the Democrats and might even have brought more on board for a vote.

"She made it clear it's a black and white issue of who do you stand with," Lee told TPM. "It's the middle class and they need to know we are pushing for them. We have to say it over and over again. They've gotta see it, smell it, sense it, taste it."

Lee (D-TX) said that Democrats should be as consistent as President Obama has been, and attempt to define the Republicans as favoring the rich.

I can't even begin to understand the thinking of any Democrat in Washington who doesn't get this. Dems have as a party railed against the Bush tax cuts for the wealthiest since the 2000 campaign. It is good politics. It makes fiscal sense. It paints Republicans as opposing middle class tax cuts if tax cuts for the rich aren't extended as well. What is the downside?

I am baffled (again).

Tax havens

Robert Reich on the administration's plan to curb tax havens:

Two reasons, both strategic. The President needs the cooperation of many big corporations if he's going to get universal health insurance enacted this year. Many of these companies would benefit from lower health costs but they're reluctant to take on Big Pharma, big health insurance companies, and major health providers, all of whom are dead set against a provision in the emerging health insurance proposal that would allow the public to opt for a government health plan. How does it help for him to take on corporate tax havens? Because the President needs as many bargaining chips with the rest of corporate America as possible. The proposed crackdown on foreign tax avoidance is one such chip. He might be willing to take it off the table if big corporations lend him active support on health insurance.

The second reason has to do with revenues. Originally the White House had planned to pay for universal health insurance by limiting tax deductions for wealthier Americans. But the Democratic leadership nixed that source. The rich Americans who take the deductions, and the groups benefiting from the wealthy's tax-deductible expenditures on them, had enough political leverage to make it a non-starter. That means the White House has to find other sources of money.

Not sure how one doesn't preclude the other, or is one a hedge against the other?

Fun with graphs

Wow. Informational graphics. Catch the fever.

Greenspun

Alan Greenspan is a cowardly old man. Rather than let his opinions be known when he actually had an influence over policy, instead he waited to speak out -- like so many who abetted the Bush/Cheney administration over the past six years -- until he had a book deal.

Though Mr. Greenspan does not admit he made a mistake, he shows remorse about how Republicans jumped on his endorsement of the 2001 tax cuts to push through unconditional cuts without any safeguards against surprises. He recounts how Mr. Rubin and Senator Kent Conrad, Democrat of North Dakota, begged him to hold off on an endorsement because of how it would be perceived.

“It turned out that Conrad and Rubin were right,” he acknowledges glumly. He says Republican leaders in Congress made a grievous error in spending whatever it took to ensure a permanent Republican majority.

Mr. Greenspan has critics as well, and they are likely to weigh in as soon as the book is published. Though he publicly disagreed with Mr. Bush’s supply-side approach to tax cuts, urging Congress to offset the cost with savings elsewhere, he refrained from public criticism that could have shifted the debate. His willingness to criticize now, 18 months after leaving office, may open him to the accusation of failing to speak out when it could have affected policy.

Today, Mr. Greenspan is indignant and chagrined about his role in the Bush tax cuts. “I’d have given the same testimony if Al Gore had been president,” he writes, complaining that his words had been distorted by supporters and opponents of the cuts.

Mr. Greenspan, of course, had been the ultimate Washington insider for years, and knew full well that politicians cited his words selectively to suit their agendas. He was also legendary for ducking delicate issues by, as he once said, “mumbling with great incoherence.”

Of course, any fool -- and Greenspan's not a fool -- knew that had he supported tax cuts during a hypothetical Gore administration, the policy outcome would have been vastly different. Bush campaigned in 2000 promising tax cuts with no real call for spending cuts. Greenspan knew that Bush/Cheney wanted tax cuts and had no concern about deficit spending. That was obvious to everyone at the time.