President Obama's Weekly Adress: 5/15/10 Wall Street Reform & Main Street

The President explains how Wall Street Reform will not only end bailouts and bring accountability for big banks, but empower consumers, shareholders and community banks.



The White House Blog.

The 10 Most Wanted Lobbyist Loopholes
Posted by Dan Pfeiffer on May 04, 2010 at 07:00 AM EDT

Loopholes are a lobbyist’s best friend.

As debate on the Wall Street Reform bill returns today to the floor of the Senate, lobbyists are working overtime to insert loopholes and special provisions into the bill. Back in March, Treasury Secretary Geithner made clear to the audience at the American Enterprise Institute the threat we face at this stage of the game:

“…watch this process closely, for it will be a test of our capacity as a nation to deal with complex and consequential problems. When you see amendments designed to weaken the basic protections of reform; when you see amendments to exempt certain types of financial firms or financial instruments from rules; ask why we should be protecting those private interests at the expense of the public interest.”

So to kick off this week of amendments and help you follow along, please take a look at the Top Ten Most Wanted Lobbyist Loopholes:

1. Ok, Consumer Protection Rules are Fine… Just Don’t Enforce Them. The current bill would apply the same rules to providers of consumer financial services or products, whether the provider is a bank or a non-bank financial provider. The bill would also allow State Attorneys General to enforce those rules. Lobbyists are pushing hard to amend the bill so that Attorneys General lose their enforcement authority. Why does that matter? Because the Bureau would only supervise larger market participants. Without state AG enforcement authority, the citizens of their states will have much less protection against illegal conduct. If you want to weaken consumer protections, that’s one way to do it.
2. Letting Non-Banks Play by a Weaker Set of Rules. We know this is coming, so keep an eye out: attempts to give car dealers that make car loans and other major providers of financial services a big exemption from the consumer protection rules. Now be aware: some people try to scare small businesses by saying that the consumer financial protection bureau will regulate main street businesses like orthodontists and florists. That is not true. But if a car dealer makes loans, or if a big department store sets up a financial services center, it’s doing what banks and credit unions do, and it should play by the same rules.
3. If You Can’t Kill Consumer Protection Now, Starve it to Death Later. One of the keys to effective consumer protection is having a consumer financial protection bureau that is independent. And one of the keys to independence is having an independent source of funding. So be prepared for attempts to take away the bureau’s source of funds. And also watch out for broader attempts to restrict the bureau’s independence or chip away at its ability to establish clear rules of the road for a fair and transparent consumer financial marketplace.
4. Preventing States from Protecting Their Own Citizens. Under the current bill, the Bureau of Consumer Financial Protection would set minimum standards for the consumer finance market, but states would still be allowed to adopt additional protections. In other words, federal consumer protections would set a floor, not a ceiling. There’s likely to be a fight about that provision. Citing the doctrine of “preemption,” big banks will try to take away states’ ability to supplement federal consumer protections. Why is this a problem? Because state officials are often the first to learn of new abuses and new problems in the marketplace, and we should not get rid of that canary in the coal mine. Federal law can overrule or “preempt” state law when a state law would significantly interfere with national banks’ business of banking, but states should otherwise have the right to protect their citizens as they see fit.
5. Removing the Derivatives Trading Requirement to Protect Wall Street Profits. Under the current bill, standard derivatives would have to be traded on exchanges or other electronic trading platforms. Expect amendments to eliminate this trading requirement. Why? Because not everyone likes transparency. Today, the big derivatives dealers make big profits by charging end-users extra spreads and hidden fees, and they don’t want that to change.
6. Stretching the Derivatives “End-User” Exemption into a Hedge Fund Loophole. Under the current bill, there is a narrow exemption from the derivatives clearing and trading requirement for commercial firms that are not financial companies, not major participants in the derivatives market, and that are using derivatives to hedge their real risks – not taking one-way bets like AIG. Be on the lookout for attempts to stretch this exemption into a loophole – for example, by saying that the exemption should apply hedge funds and other financial companies.
7. Creating an “AIG Loophole.” Under the current bill, the Financial Services Oversight Council would have the ability to designate a very large “non-bank” financial company – like AIG, for example – for tougher supervision by the Federal Reserve. Since one of the key principles of financial reform is that firms should be regulated according to the risks they pose, not according to their corporate form, this is an important provision. But rest assured, there are large “non-banks” out there who would rather not be scrutinized quite so closely.
8. Who Needs to Know What’s Happening at Insurance Companies? Insurance is regulated by the states, not the federal government – and this bill doesn’t change that. But this bill would give the Treasury Department the ability to collect information from insurance companies so that it can help identify emerging risks before they blow up the financial system – like AIG. After so many insurance companies got into so much trouble that they needed government support to survive, you’d think that would be a no-brainer. But not everyone agrees. Keep an eye out for loopholes that would protect insurance companies from a number of provisions in the bill – including even basic information gathering.
9. Letting Firms Make Loans Without Skin in the Game. A key lesson of the crisis is that firms in the mortgage business should have a stake in the loans they sell or securitize. Skin in the game gives strong incentives to make good quality loans. Mortgage industry lobbyists are pushing hard to kill this idea. It’s cheaper for mortgage lenders and Wall Street to be in the mortgage business if they don’t have to worry about the borrower’s ability to pay – but it’s a lot more costly for Americans to perpetuate the same system that helped cause the housing crash.
10. Preserving “Too Big to Fail” While Pretending to Kill It. The key to preventing future bailouts is to end the problem of “Too Big to Fail.” And the only way to do that is to make sure that we can shut down big financial firms in a swift, orderly way if they’re on the brink of failure. Of course, not everyone wants to see “Too Big to Fail” disappear, since it lets the biggest firms borrow money at lower cost and avoid the consequences of excessive risk-taking. But no one wants to be caught defending the status quo. So defenders of the status quo are using a sleight of hand: pushing to make the resolution process so unwieldy that it can never work. By proposing amendments that look tough but that make the resolution process unworkable, opponents of reform will try to save “Too Big to Fail” while pretending to kill it.

Dan Pfeiffer is White House Communications Director

President Obama's Weekly Address: 4/24/10 Good News from the Auto Industry

As the auto industry and financial markets begin to stabilize, the President says the government’s emergency interventions are now winding down. He pledges that real reform, particularly on Wall Street, must now begin.

Obama, More Like Gandhi ?

Hendrik Hertzberg  has a great piece in The New Yorker titled Partisanship, By the Bye.  It talks about how President Obama is using bipartisanship as a political weapon:

"Fifty years ago, the civil-rights movement understood that nonviolence can be an effective weapon even if -- or especially if -- the other side refuses to follow suit. Obama has a similarly tough-minded understanding of the political uses of bipartisanship, which, even if it fails as a tactic for compromise, can succeed as a tonal strategy: once the other side makes itself appear intransigently, destructively partisan, the game is half won. Obama is learning to throw the ball harder. But it's not Rovian hardball he's playing. More like Gandhian hardball."

- Political Wire

How The World Almost Came To An End At 2PM On September 18

Very Interesting - So how closed did the nation's banking system come from a total meltdown on September 18th of last year? Extremely close, within hours as a matter of fact.

On C-Span, Rep. Paul Kanjorski (D-PA) explained how the Federal Reserve told members of Congress about an electronic run on the banks "to the tune of $550 billion dollars" within "an hour or two" last fall.

According to Kanjorski, on September 18, 2008 the Fed tried to "stem the tide" by pumping money into the financial system but it didn't work and decided instead to announce an immediate increase in deposit insurance to $250,000 per account to stop the panic.

Said Kanjorski: "If they had not done that, their estimation is that by 2 p.m. that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it." -Political Wire

Watch and listen to what Rep. Kanjroski had to say about this on C-Span yesterday morning. Its kind of scary if you really think about it and to find out that our banking system is not much better off today then it was it was 4 months ago makes you want to scratch your head. 

After hearing this, I now understand why Treasury Secretary Geithner feel that the new financial bailout plan needs to be so bold and large in scope.

Why An A**Hole is Always in Charge.

Greg Palast, one of my favorite writers, is the co-author of Steal Back Your Vote, a comic book co-authored with Robert F. Kennedy Jr. Palast is also an investigative reports on BBC Television's Newsnight and in Rolling Stone Magazine.

Palast wrote the following article for SuicideGirls.com in which he expressed his outrage and dismay over former Merril Lynch head honcho John Thain, who was able to sell a worthless Merril Lynch to Bank of America for $50 Billion and then when Bank of America realized that Merril was in worst trouble than what they thought, Thain was able to wrestle another $20 Billion from the U.S Treasury to cover that loss.

As outrageous as that may sound it was nothing in comparison to Thain's audacity in spending $1 million refurbishing his office, which included spending $35,000 on a toilet and then demanding a $30 million bonus from Merril Lynch for his efforts.

Here is some of what Greg Palast had to say:

John Thain is the guy that looks like a Clark Kent doll you saw grinning from page one of your paper Friday morning. Thain was just fired by Bank of America because the square-jawed executive demanded a $30 million bonus after losing $5 billion in just three months at the bank's Merrill Lynch unit. In addition, Thain spent over a million dollars redecorating his office while, at the same time, the U.S. Treasury was bailing out his company with billions in aid. Thain's office re-do included the installation of a $35,000 toilet bowl.

Thain was robbed. He shouldn't have been fired; he should have gotten a $60 million bonus -- and Obama should immediately hire him as Secretary of the Treasury in place of that tax-dodging lightweight that's been nominated, Timothy Geithner.

Here's the facts, ma'am.

Thain was CEO of Merrill Lynch, the big brokerage firm. On a good day, Merrill is worth zero. A week before it was about to go out of business, Thain sold this busted bag of financial feces to Bank of America for $50 BILLION.

I'd say that's worth a bonus.

But it gets better. When the bag broke and another $5 billion in losses were discovered at Merrill, Thain went to the U.S. Treasury and got ANOTHER $20 BILLION to cover Bank of America's bad financial bet -- from us, the taxpayers.

Now that certainly deserves a bonus. And let's face it, a butthole that big needs a $35,000 toilet....

Finish reading what Greg had to say >>>Here

 

Wall Street has its doubts about stimulus merits

By Ian Swanson - The Hill

Not everyone on Wall Street thinks the stimulus package Congress and President-elect Obama are constructing will solve the economy’s ills.

While many think a combination of tax cuts and spending will spur the economy at a time when consumers and businesses are keeping a tight grip on their cash, others are preparing for another plunge in markets.

“I think there’s still a big split here,” said Brian Gardner, a former aide on Capitol Hill who now offers analysis at Keefe, Bruyette & Woods. Some investors think “the stimulus package is not getting at the fundamental problems of the economy,” Gardner said, particularly the housing problem at the center of the crisis.

Axle Merk, the portfolio manager of Merk Investments, sees Federal Reserve actions to keep interest rates low as “propping up a broken system” and questions the wisdom of providing incentives for consumers to spend on mortgages and cars when they should be saving.

“I think as this thing progresses, they’re going to get frustrated,” he said of Washington policymakers. “Nothing will work out as planned.”

Read more >>> Here

Legalizing Marijuana Tops Obama Online Poll

Break out the blunts and pass the munchies, the results are in from the Change.gov online poll that asked for people's opinions on what are the most important issues that they would like to see an Obama administration address. The issue that topped list was wether or not the president elect would consider legalizing the use of Marijuana.

With all of the more pressing concerns that face our nation like the economy and Iraq, I found this rather amusing and I an sure it was not what team Obama was asking for.

  

The following letter was posted on the Congressional Blog page of The Hill, it was written by the National Organization for the Reform of Marijuana Laws Deputy Director Paul Armentano:

 
Be careful what you wish for.

Last week, the website Change.gov — the official website of the Obama Transition Team — asked the public to provide them with a list of the top public policy questions facing America. Visitors to the site were then asked to vote on which questions should take priority for the incoming administration.

According to the website, “participation … outpaced our expectations. … Since its launch … the Open for Questions tool has processed over 600,000 votes from more than 10,000 people on more than 7,300 questions.”

Ironically but perhaps not surprisingly the top question for the new administration — as chosen on and voted by the general public — was one most politicians seem utterly unwilling to talk about.

“Will you consider legalizing marijuana so that the government can regulate it, tax it, put age limits on it, and create millions of new jobs and create a billion dollar industry right here in the U.S.?”

To anyone thinking the #1 question was some kind of fluke, consider this: More than a dozen of the top 50 vote-getting questions pertained to amending America’s drug policies. For example:

Question #7: “Thirteen states have compassionate use programs for medial Marijuana, yet the federal government continues to prosecute sick and dying people. Isn’t it time for the federal government to step out of the way and let doctors and families decide what is appropriate?” The public’s demand for the Obama administration?”

Question #13: “How will you fix the current war on drugs in America? and will there be any chance of decriminalizing marijuana?”

Question #15: “What kind of progress can be expected on the decriminalization and legalization for medicinal purposes of marijuana and will you re-prioritize the “War On Drugs” to reflect the need for drug treatment instead of incarceration?”

Following the poll, the Obama Transition Team posted the following reply, “Over the next few days, some of the most popular questions selected by the Change.gov community will be answered by the Transition team, and their responses will be posted here on the site.”

So will Obama’s team respond to the demands of the electorate and initiate an honest, objective, and long-overdue review of U.S. Marijuana policies? Or will the incoming administration — like the outgoing one — hide their collective heads in the sand?

It was just over a month ago when statewide marijuana law reform initiatives in Massachusetts and Michigan prevailed with more votes than America’s soon-to-be 44th President — once again reaffirming the widespread popular support for changing our nation’s antiquated and punitive pot laws. It wasn’t clear that either the national media or the incoming administration were listening then. Are they listening now?

Michael Moore How The Auto Bailout Should Go Down

Michael Moore on "Countdown with Keith Olbermann", talking about the controversy surrounding the Big 3 (GM, Ford, Chrysler) trying to get a $25 billion (or possibly $34 billion) in bailout loans from Congress.

Bailed-Out Citi Bank Goes on Toll Road Buying Binge

Can you believe this? After securing over $326 billion in bailout money and  debt guarantees, Citigroup just purchased a debt burdened Spanish toll road for $10 billion! 

I say if Citigroup has an extra $10 billion laying around then why not give it back to the american taxpayers that just bailed their asses out. 

From Moneynews.com -

" Debt-laden Spanish construction company Sacyr Vallehermoso said Monday it has agreed to sell its highway-operating unit, Itinere, to a Citigroup Inc. fund in a deal valued at nearly euro7.9 billion ($10 billion).

The sale involves euro2.87 billion in cash and euro5 billion in assumed debt, the company said.

Sacyr Vallehermoso has been hard hit by the collapse of Spain's real estate bubble and is eager to ease its debt load.

The sale of Itinere to Citi Infrastructure Partners, which needs regulatory approval, will reduce the Spanish builder's debt to about euro12.5 billion, the latter said in a filing with Spanish stock market regulators.

If this deal goes through, Sacyr Vallehermoso will have cut its debt by 37 percent since Jan. 1, it said.

Much of its debt stems from its acquisition two years ago of a 20 percent stake in Spanish oil company Repsol-YPF.

In September, Sacyr Vallehermoso put that stake up for sale and the Russian oil company Lukoil recently expressed interest in acquiring it.

The money Sacyr Vallehermoso would take in from the Citigroup deal is expected to reduce pressure to sell its stake in Repsol-YPF.

Citi Infrastructure Partners will offer to buy all of Itinere's stock at euro3.96 ($5.04) a share, the Spanish firm said.

The Spanish construction company will first sell Citigroup a 42.8 percent stake in Itinere, and once this is complete, another 11.6 percent stake, Sacyr Vallehermoso said.

After the acquisition, Citi Infrastructure Partners will resell some Itinere highways in Spain and Chile to Spanish infrastructure company Abertis for 621 million euros ($790 million), Sacyr Vallehermoso said."

Corzine Talks Recession with Rachel Maddow

On a segment on the Rachel Maddow show yesterday, NJ Gov. Jon Corzine made an appearance to discuss the recession and what he was going to talk to President elect Obama in Philadelphia today. 

Corzine mentioned that Obama is a great listener and he hopes that Obama will support a huge stimulus package for the States.

Coming up: A huge pension bailout?

The housing bubble lead to the mortgage crisis, then the financial crisis and the auto industry crisis, commercial real estate is on the verge of a crisis with so many businesses filing for bankruptcy and closing their doors, can a pension bailout be far behind? Michael Brush seems to think so.

Brush has posted an article on MSN Money explaining why he thinks a pension bailout is not far behind:

"Americans with 401(k) plans in stocks have been feeling queasy for months as they've watched their savings vanish at alarming rates.

But workers covered by traditional pension plans -- the ones 100% funded and managed by companies for employees -- have so far avoided that sinking feeling.

Unlike the 401(k) crowd, they don't get monthly statements bearing the grim news of the lousy performance of the investments in their pension plans.

But with stocks and bonds crushed, many of these old-school defined-benefit plans now look downright wobbly. If the economic weakness continues long enough, many could end up in the hands of the independent government agency responsible for taking over failing plans...."

Treasury may have to request funds from Congress

The Hill, Leading the News-

Treasury Secretary Henry Paulson is close to running out of money and soon may have to ask Congress for access to the rest of the $700 billion package it approved for rescuing the economy.

Paulson has said that he intends to leave the second $350 billion of the package for President-elect Barack Obama's administration, but the government's moves in just the last two days leave Paulson with only about $20 billion in funds for the nearly two months remaining until Obama’s inauguration.

The continuing market volatility and tough credit markets could force Paulson to seek access to the funds, particularly as the government continues to unveil new programs to prop up the economy.
On Tuesday, Paulson did not rule out requesting access to the remaining funds.

“When the time is right, we’ll avail ourselves of the congressional process,” Paulson said during a press conference.

Treasury has the authority to spend $350 billion of the $700 billion Congress authorized in October under the Troubled Asset Relief Program, known as TARP. The government has committed about $330 billion so far, leaving it with about $20 billion before it would have to make its request to Congress.

Paulson must submit to Congress a plan on how Treasury would use the money in order to access the final $350 billion. Lawmakers could choose to restrict how Treasury can use the money.

Two new efforts that the government announced this week have pushed Paulson closer to having to make a request.

One day after putting together $20 billion in aid for Citigroup, Treasury announced it would provide $20 billion to the Federal Reserve for credit protection as part of the two new programs to prop up the home mortgage and consumer credit markets.

The Federal Reserve offered assurances Sunday on $306 billion in troubled assets for Citigroup as part of the effort to save the firm, which was seen as being on the verge of collapse.

The government has set up a new $200 billion program aimed at unfreezing lending in the consumer credit markets for student loans, car loans and other asset-backed securities. Paulson also suggested that the program could be expanded to additional types of assets, such as commercial mortgage-backed securities and non-agency residential mortgage-backed securities.

“That $200 billion is a starting point. This is — it's going to take a while to get this program up and going. And — and then it can be expanded and increased over time,” Paulson said.

The Federal Reserve set up a program on Tuesday that could support up to $600 billion in debt issued by or backed by the hobbled government-sponsored enterprises, Fannie Mae and Freddie Mac. "Nothing is more important to getting through this housing correction than the availability of affordable mortgage finance," Paulson said.

Bailouts for Bankers, Not a Cent for Autoworkers

John Nichols, The Nation-

This is the part of our nation's surreal economic crisis that seems particularly surreal:

The U.S. auto industry, which employs 3 million Americans in auto plants, parts and supplier networks and dealerships nationwide is broadly understood as being essential to maintaining America as an industrial force. It's financial collapse, which even critics of moves to bailout the industry suggest is imminent, would devastate workers, retirees and communities in every state of the nation. Despite the grumbling from anti-union zealots, the auto giants have radically retooled in a manner that makes the cost of producing a vehicle at a unionized plant of General Motors, Ford or Chrysler roughly equivalent to the cost of running a car off the line at a non-union plant. And to top it all off: Auto plants actually produce something that most Americans consider to be useful.

Yet, proposals to provide what now seems to be a very small bailout -- $25 billion -- are currently stalled.

At the same time, the whole of the federal government is scrambling to buy as much as $50 billion in "toxic assets" -- bad loans and other products of irresponsible financial practices that are of dubious value -- from Citigroup, a global banking concern that makes money by charging working families exorbitant interest rates for credit. According to the Wall Street Journal, "[The move to protect the banking concern] would mean taxpayers could be on the hook if Citicorp's massive portfolios of mortgage, credit cards, commercial real-estate and big corporate loans continue to sour."

Perhaps, in some wild calculation of American interest, Citicorp is worthy of a bailout.

But what mad calculus would make Citigroup more worthy than the auto industry?

And why the urgency with regard to Citigroup and the casual disengagement with regard to the industrial giants that, for all their flaws and perils, remain what Barack Obama correctly described as "the backbone of American manufacturing"?

Something is fundamentally wrong with a federal government that offers bankers a bailout and autoworkers as cold shoulder.

Citigroup’s Spending Indefensible and Unacceptable (Rep. Elijah Cummings)

From the Hill's Congressional Blog-

After reading yesterday morning that Citigroup–which has already received $25 billion in bailout money–is adamant in maintaining its $400 million naming rights to the new New York Mets stadium, I was shocked to learn that the company came to the federal government asking for an additional multi-billion dollar lifeline. Surely, if the company has the funds to paste its name to a recreational facility, it has the money to maintain its operations and keep the 52,000 jobs it announced last week it would be eliminating.

While I understand that Citi is under a contractual obligation with the Mets, I cannot understand why the organization seems to be refusing at the very least to explore options out of that contract. This type of spending is indefensible and unacceptable to Citigroup’s new partner and largest investor: the American taxpayer. My constituents in Maryland did not turn over their hard-earned wages to fund a baseball stadium in New York.

One would think that the Mets would be open to finding a new sponsor, as well. Why would any team want its new stadium, the symbol of a new era of victories, to be named after and symbolized by a company claiming to be on the brink of collapse?

I strongly urge Citigroup to find a way out of this contract and instead spend that $400 million on retaining its employees and restoring confidence in its operations. Furthermore, I encourage Citigroup and every other corporation depending on taxpayer dollars to stop the reckless spending, and I again insist that Secretary Paulson and Chairman Bernanke start holding these companies accountable. We cannot continue to pour taxpayer dollars into buckets with holes.

Dodd Says Auto Bailout Lacks Votes in Senate

The NY Times has just posted a column by David Herszenhorn stating how Connecticut Senator Chris Dodd, who is Chairman of the Senate banking committee, has just announce that Auto industry bailout lacks votes in the Senate at this time.

"The chairman of the Senate banking committee said on Thursday that he did not believe there would be enough Republican support for efforts to aid floundering automobile manufacturers, raising doubts about whether Congressional leaders will call the House into a lame-duck session next week.

“Right now, I don’t think there are the votes,” the chairman, Senator Christopher J. Dodd of Connecticut, said, adding that he personally was in favor of using money from the $700 billion financial rescue program to help General Motors, Ford and Chrysler. But Mr. Dodd said he did not believe such a bill would get through the Senate.

“I don’t know of a single Republican who’s willing to support,” Mr. Dodd said. “So I want to be careful about bringing up a proposition that might fail in light of the fact the authority exists, and under an Obama administration there seems to be a greater willingness to deal with the issue. So there are some political considerations to be made.”

Passing any legislation to aid the auto companies would require 60 votes in the Senate. Democrats have 49 seats, Republicans have 49 seats and there are 2 independents who caucus with the Democrats..."

Click HERE to finish reading David Herszenhorn's column in the NY Times

Beyond the Fat Cats

NY Times Op-Ed Columnist Bob Herbert  rants on that about how the Democrats and President- Elect Obama needs to look beyond the Wall Street fat cats and bring back a sense of fairness and equity to the economy. Its a good column and worth a look.

"The most important thing the Democrats and President-elect Obama can do with regard to the economy is bring back a sense of fairness and equity.

The fat cats who placed the entire economy at risk with their greed and manic irresponsibility are trying to lay claim to every last dime in the national Treasury. Meanwhile, we’re nowhere close to an economic recovery program that will help the people who are hurting most.

Back in September, with the credit markets frozen and the stock markets panicking, the treasury secretary, Henry Paulson, was telling anyone who would listen that his $700 billion bailout package had to be passed with lightning speed — no time to look at it too closely, no time for dissent.

The package was modified, but hurriedly. Now we learn that while all eyes were focused on this enormous new burden for American taxpayers, Mr. Paulson’s department was also engineering — separate and apart from the bailout — what The Washington Post described as “a quiet windfall for U.S. banks. ”

With virtually no public attention, and without the input of Congress, Treasury made a change in an obscure tax provision that benefited banks to the tune of well over $100 billion. Was this good policy? In the absence of proper scrutiny, how is it possible to know?

We’ve also learned that the government bailout of the giant insurer, the American International Group — already more than $100 billion — is apparently insufficient. Tens of billions more are needed...."

Click HERE to finish reading Bob Herberts column from the NY Times

How to Fix a Flat

NY Times Op-Ed Columnist Thomas L. Friedman rants on about the proposed bailout of the Detroit auto industry in his column today. While I don't always agree with what he has to say, I am with him on this. Those of us that can remember the Chrysler bailout in the 80's remember what a big deal it was then, now we're talking all of  Detroit. When will it end?

"Last September, I was in a hotel room watching CNBC early one morning. They were interviewing Bob Nardelli, the C.E.O. of Chrysler, and he was explaining why the auto industry, at that time, needed $25 billion in loan guarantees. It wasn’t a bailout, he said. It was a way to enable the car companies to retool for innovation. I could not help but shout back at the TV screen: “We have to subsidize Detroit so that it will innovate? What business were you people in other than innovation?” If we give you another $25 billion, will you also do accounting?

How could these companies be so bad for so long? Clearly the combination of a very un-innovative business culture, visionless management and overly generous labor contracts explains a lot of it. It led to a situation whereby General Motors could make money only by selling big, gas-guzzling S.U.V.’s and trucks. Therefore, instead of focusing on making money by innovating around fuel efficiency, productivity and design, G.M. threw way too much energy into lobbying and maneuvering to protect its gas guzzlers.

This included striking special deals with Congress that allowed the Detroit automakers to count the mileage of gas guzzlers as being less than they really were — provided they made some cars flex-fuel capable for ethanol. It included special offers of $1.99-a-gallon gasoline for a year to any customer who purchased a gas guzzler. And it included endless lobbying to block Congress from raising the miles-per-gallon requirements. The result was an industry that became brain dead.

Nothing typified this more than statements like those of Bob Lutz, G.M.’s vice chairman. He has been quoted as saying that hybrids like the Toyota Prius “make no economic sense.” And, in February, D Magazine of Dallas quoted him as saying that global warming “is a total crock of [expletive]....”

Click on to the headline to finish reading Thomas Friedman's article

What the Next President Inherits

What could be more important than the upcoming election? What the next president actually does once elected. While a feverish media dissects Palins wardrobe and plumbs Joe Wurzelbachers biography, real challenges for America are piling up. Domestic struggles over marriage and abortion rights will define who we are, and our response to global conflicts and crises will define our place in the world. The end of the campaigning is just the beginning.

Rudderless Republicans

From MSNBC's First Read -

"So who runs the Republican Party? Apparently nobody. Perhaps the most startling political development was the amazing lack of leadership on the GOP side of the aisle. Let's run down the list of Republican leaders who attempted to persuade skeptical House Republicans: President Bush, John McCain, Dick Cheney, and John Boehner... Bush's leadership and trust issues within his party has been evidenced for quite some time, and the icing on the Bush legacy cake is that fact that he could only convince FOUR Texas House Republicans to support his bill.

"And then there's John McCain, who last week decided to insert himself into the process and then (before the bailout failed) took credit for getting wavering House Republicans on board... Now McCain gets a double stomach punch: He's stuck being seen as supportive of this bailout (which isn't exactly popular with the conservative grassroots) and he gets to share in the blame for the defeat since he didn't have enough political capital to get this done (By the way, not a single member of the Arizona GOP delegation voted for this bill). Watching the McCain campaign deal with this yesterday, one could sense that they were fearful that they were going to look inept and take an even deeper political wound than they sustained last week."

The Bailout Defeat: A Political Credibility Crisis

Time Magazine's Michael Scherer notes that our political system might be just as bankrupt as our financial system. I

"Nearly every major political leader in America supported the $700 billion financial bailout bill. The President of the United States. The Vice President. The Treasury Secretary. The Chairman of the Federal Reserve. The Chairman of the Securities and Exchange Commission. The Democratic and Republican nominees for president. The Democratic and Republican leadership of the House and the Senate. All of them said the same thing. Vote yes."

"But a majority of those politicians anointed by the U.S. Constitution to reflect the will of the people voted no. This is a remarkable event, the culmination of a historic sense of betrayal that Americans have long felt for their representatives in Washington D.C. The nation's credit crisis exposed Monday a much deeper and more fundamental problem -- a political credibility crisis that now threatens to harm our nation further, should the markets freeze up and more companies begin to fail, as many experts predict."...