Krugman: Banks are back to business as usual

In the NYT, Paul Krugman notes that the banks are increasingly engaging in the same risky short-term profiteering that let to the economic meltdown:

In the grim period that followed Lehman’s failure, it seemed inconceivable that bankers would, just a few months later, be going right back to the practices that brought the world’s financial system to the edge of collapse. At the very least, one might have thought, they would show some restraint for fear of creating a public backlash. But now that we’ve stepped back a few paces from the brink — thanks, let’s not forget, to immense, taxpayer-financed rescue packages — the financial sector is rapidly returning to business as usual. Krugman further notes that Obama hasn't yet shown the courage to directly confront the bankers, a move that, according to Krugman, could be politically popular.

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Brand Obama–now with more awards!

Barack Obama's presidential campaign has again won a major advertising award. A month before winning the presidency, he won Advertising Age's annual "Marketer of the Year" for 2008. Now, his campaign manager, David Plouffe, has won Brandweek's "Marketer of the Year" for 2009. What better commentary on the state of contemporary American society could there be? Our president is a master marketer, or more precisely, employs a team of master marketers. In a society that is dedicated to worshiping at the altar of consumerism, perhaps it's unsurprising that this is the case, but it still is shocking to me. Once I began researching for this article, I really was surprised at the extent to which "Brand Obama" has penetrated our national consciousness. His logo and posters have become iconic. His slogan, "Yes we can" is everywhere-- it's also a marketer's dream. It's devoid of any clarity or substance, and yet it makes you feel good, possibly empowered. "Just do it", anyone? Actually, his campaign beat out the Nike campaign (and even Apple!) for top honors. You can go to mybarackobama.com and sign for immediate updates from Facebook, Myspace, Youtube, Flickr, Twitter, and several other web 2.0 services. You can get Obama on your mobile phone by texting "hope" to 62262-- it's just as easy as voting for the next American Idol! The media is relentlessly focused on what Michelle Obama is wearing next, and there is at least one blog offering daily updates on her clothing choices ("Follow the fashion of Mrs. O.:What and Whom she's wearing"). For those who are tuned-in, you can even do Ecstasy tablets shaped like Obama. One wonders where does politics end and the cult of personality begin?

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Dark days and “Green Shoots”

“We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both.” --Supreme Court Justice Lous D. Brandeis
For all the discussion of "green shoots" and an economy on the mend, there's plenty of data and commentary to the contrary. What's interesting to me, is that recent developments only highlight the extent to which Main Street economics have become irrelevant to Wall Street. The administration is claiming that the crisis is largely over, and that it's time to breathe a sigh of relief. President Obama yesterday argued that "we can be confident that the storms of the past two years are beginning to break." Treasury Secretary Timothy Geithner discussed last week beginning to wind down some of the programs that were implemented in the heat of the crisis late last year. The value of the Dow Jones Industrial Average has risen from its July low of 8146, and is now trading around 9600. Everything seems well and good in the world of high-finance. But others see it differently. Nobel-prize winning economist Joseph Stiglitz argued this week that nothing has been done to address the underlying banking problems that created the mess in the first place, adding that "the problems are worse than they were in 2007 before the crisis." Simon Johnson, former chief economist of the IMF, echoes that sentiment, and points out that the real issues underlying the crisis have not been addressed at all. He lays out 4 areas of concern:
  1. The big banks need to be made to be dramatically smaller.
  2. Executives need to have a great deal of their personal wealth tied up in their banks to prevent a reckless focus on short-term results.
  3. An end to the revolving door between Wall Street and Washington, DC. "There is no way people should be able to go directly (or even overnight) from a failing bank to designing bailout packages to benefit such banks. In any other industry, in any other country, and at any other time in American history, this would have been seen as an unconscionable conflict of interest. "
  4. The financial elite is aware that they are able to exploit the Federal Reserve and use it as a "bailout machine".

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Was Obama a liar?

I'm shaking my head at the terrible news coverage of Republican Joe Wilson's outburst during Barack Obama's health care speech last night. I'm not denying that Wilson's rude behavior is news, but look what's missing in prominent articles covering this story: Was Obama lying? It would seem that reporters should be asking whether Obama ever previously took a position on whether illegal aliens should be covered under what he proposes to be the new health care plan. Consider this AP article, which does what you expect. Wilson is rude; Wilson called the President a liar during a nationally broadcast session of Congress; the President looked stunned; Wilson was heavily criticized; John McCain is applauded for saying the obvious, that Wilson should apologize; Wilson does apologize; lots of head shaking; what will his behavior mean for Republicans? If I were teaching journalism school, I would tell my cub reporters to figure out whether Obama has ever promoted national health care coverage for illegal aliens. Then I would tell them to report on this central issue. If Obama has promoted health care coverage for illegal aliens, he was a liar. If he has never taken this position, then Joe Wilson is a liar. If Obama had previously taken the position that illegal aliens won't be covered, then Joe Wilson is a big fat despicable liar. If Joe Wilson turns out to be a liar, then his apology would need to go much further than it did; it would need to admit not only that he was rude but that he was the liar; he would need to admit that Obama never advocated health care coverage for illegal aliens. In any case, Wilson should be cross-examined like this by reporters: On what basis did you claim that Obama was lying? Show us your evidence. If Wilson has no evidence, he should admit that he had no evidence, and then he should add that he makes things up and that he is exactly the sort of mindless obstructionist to health care that shouldn't be part of the conversation because he is not an evidence-based being. Unfortunately, the media is once again running wild with the conflict of the moment, with the apology and all the head-shaking. Instead of covering the obvious issue that would put an end to the big sideshow, most news stories have side-stepped it. This issue of coverage for illegal immigrants is important for many people. It would be great for the illegal immigrants, of course, but it would also drive up the bill for all of those people who pay taxes (this would include many illegal immigrants). This is an important and contentious issue that needs to be addressed clearly. But when Joe Wilson shouts that Obama is a liar, the media can't even get to the point: Was Obama a liar? It is so damned difficult to keep the media focused on the actual terms of proposed health care reform. I do think shouting "Liar" at a President could be appropriate, even in Congress, if the President were lying about an important issue. It would be an extraordinary thing to do, but what if, for example, the President was lying to Congress that there were weapons of mass destruction in Iraq and that a war would be a cheap cake-walk when he knew these to be lies. In that case, I would think it would be appropriate for a dissenting member of Congress to stand up and call him a liar in order to spare the lives of several thousand American soldier, to prevent tens of thousands of soldiers from being maimed and to prevent the deaths, injuries and homelessness of hundreds of thousands of Iraqi people. Too bad no member of Congress had the guts to stand up and break the silence in early 2003.

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