Fi-Cri: Washington fiddles, Brussels performs, I opine

LSE’s Willem Buiter today looks at the fi-cri in a comparative way, comparing the financial stabilization effort underway in the US with that in Europe’s Benelux region (Belgium, Netherlands, Luxemburg.) He concludes:

    Especially remarkable is the fact that it took much less time and effort to put together the multi-country fiscal rescue effort of the three EU member states than it took to cobble together the son-of-TARP in the US. Incipient federalism triumphs over disfunctional established federalism.

‘TARP’ is the Troubled– or ‘Toxic’?– Assets Relief Program still being negotiated in Washington. Those negotiations are once again today, as last Wednesday, said to be nearing completion.
Paul Krugman is (cautiously) for it, writing:

    Not a good plan. But sufficiently not-awful, I think, to be above the line; and hopefully the whole thing can be fixed next year.

Seeking Alpha has some worthwhile comments on the draft legislation here.
For my part, I am very “troubled” about the name of the plan and what it connotes. It is not the “Troubled (or Toxic) Assets” that need “Relief”. It is the economy as a whole and all the hard-working people who participate in it that need relief from the current strangulation of the credit markets and the very real threat of Depression.
What the Toxic Assets themselves need, by contrast, is radical restructuring and re-regulating. I call this my “Three R’s program.”
And what the present holders of the toxic assets need is discipline. Not the alleged “discipline” of the market, either; but the discipline and accountability of a legislated scheme to regulate the financial markets that has been publicly deliberated and adopted, and is well understood and well implemented. Enough with all these wild Ponzi schemes and dodgy financial “instruments” that have proliferated just about incomprehensibly in the barely regulated financial markets of the past nine-ten years.
As for the TARP– the idea of this extremely expensive bailout being discussed in Washington is that it should be extensive enough to protect the whole of the financial from further corrosion of its claimed “value.” No-one is sure if the $700 billion TARP is actually big enough to do this. To my view, the only value of any such bailout plan (if one is indeed needed) is that it should prevent total corrosion/meltdown of the financial system just for long enough to allow the Three Rs program to be carried out on the financial assets that it protects.
What is material wealth for, after all?
If it is good for anything, it should surely be used to allow all of humanity (or, in a more restricted sense, all members of a single national community) to have the basic underpinnings of human flourishing. That, after all, is the way to “buy” a decent sense of security, wellbeing, and hopefulness for all of us.
Meantime, Buiter’s comment about the dysfunctionality (in British English, disfunctionality) of the US political system at this time of crisis is certainly right on the mark.
(Update, 10:55 a.m.: Kudos to Rep Marcy Kaptur (Dem-Ohio) for her proposal for a Wall Street Reckoning project to replace the TARP bail-out proposal. (HT: Juan Cole.) Kaptur calls for a “modernized Glass-Steagall Act” to re-regulate the US banking sector. Glass-Steagall was the landmark 1933 legislation that established the FDIC. It was repealed in the Gramm-Leach-Bliley Act of 1999. Sen. Phil Gramm is a close ally of John McCain’s and has been tipped to become Secretary of the Treasury if McCain wins the election.)

Dems back off from escalation vs. Iran

So it looks as if the Democratic Party leaders in Congress finally get it about the interdependence of the United States with the other six billion people of the world, and about the counter-productive nature of a policy of escalation, confrontation, and possible war?
That’s how it seems from this report by Nicholas Kralev in today’s Washington Times, who writes that

    The House Democratic leadership has effectively shelved a resolution calling for what critics say would amount to a naval blockade of Iran because of concerns that it could provoke another war…

(HT to Think Progress for that.)
The resolution in question, House Concurrent Resolution 362, has been very heavily pushed by AIPAC, the mammoth-sized pro-Israel lobby in Washington DC. They no doubt hoped they could ram it through Congress in the period when members are maximally concerned about fund-raising and accusations of “being soft on Iran” in the run-up to the election.
Kralev notes,

    Even though the document would not be a law but a “statement of policy” aimed at preventing Tehran from obtaining a nuclear weapon, the Democratic leadership is worried that it could be viewed by the Bush administration as a green light to use military force against Iran, officials said.
    Howard L. Berman, California Democrat and chairman of the House Foreign Affairs Committee, said he has concerns about the current text and will not bring it before the committee until those issues are addressed. That, in effect, blocks the document from reaching the floor.

Phew! People in the peace movement have organized and lobbied hard against the resolution ever since it was introduced. It had more than 200 “co-sponsors” who eagerly lined up to get their names attached to what looked like an attractive, vote- and money-winning resolution.
But then, we all made the point that with this administration, if congress gives them an inch in terms of escalating tensions with another country, quite likely Bush will end up taking a couple hundred miles… And with the military as overstretched as it now is, and in the current global economic climate, do we really want to start yet another war, this time against Iran?
Over the summer, persistent lobbying by the peace movement managed to peel five of the bill’s original co-sponsor’s off that roster. Now Berman and his colleagues have definitively closed down the possibility of AIPAC getting the bill considered and voted on before the election. (After which, it will almost certainly die because of its own considerable demerits.)
I am so glad the congressional leaders finally connected these dots… between their responsibilities as lawmakers and the belligerent and near-criminal irresponsibility of the administration… between a rise in tensions in the Middle East and the probability of further huge blows to the world’s economic system (not to mention the US military)… between the global image of the US as a unilateralist, ill-governed bully on the world stage and the fact that right now, like Blanche in A Streetcar Named Desire, our country is dependent on the goodwill of others.
There are signs of intelligent life in Washington! Praise the Lord!
(And maybe we should all send thank-you notes to Howard Berman.)

Distrustfulness, politics, and the financial crisis

So Bush and Paulson failed in their attempt to conclude a deal with the congressional leaders yesterday on the proposed financial bailout. And it was their fellow Republicans in Congress, egged on by a grandstanding John McCain, who stymied the plan. Today, the negotiations resume.
My judgment is that Obama came out of the events of the past two days looking a lot better than than McCain. (Sorry that in an earlier version I put that the wrong way round. I’m working on a very small screen here) Here’s the NYT’s account of yesterday’s White House emergency summit. It was McCain who’d injected campaign politics into the negotiations by insisting that both he and Obama should be at the table– but then he came out looking like a childish drama queen and spoiler, while Obama came out looking much more statesmanlike.
That political judgment is quite independent of the actual content of the plan, which still looks like a pig however much lipstick they daub onto it. This is a good round-up of the views of many academic economists. Calculated Risk pulled out some money quotes, as follows:

    “There is a kind of suggestion in the Paulson proposal that if only we provide enough money to financial markets, this problem will disappear,” said Joseph Stiglitz, a Nobel Prize-winning economist. “But that does nothing to address the fundamental problem of bleeding foreclosures and the holes in the balance sheets of banks.”
    … “The root of the issue is recapitalizing banks,” said Glenn Hubbard, dean of Columbia Business School and a former chairman of President Bush’s Council of Economic Advisers. “That could be done more efficiently through the government injection of preferred equity. Then the market could figure out the prices of the assets.”

As I see it, the crisis is overwhelmingly one of confidence within the banking/’financial system, and also of the underlying credibility of the figures and claims produced by many of the system’s leading actors. (The word “credit” has to do with trust, as much as with the technical details of borrowing or lending.)
But the problem of confidence goes much further than just between one financial institution and another. There is a much deeper crisis of confidence in the US financial and economic system as a whole– one that is made a lot worse by the fact that the regulatory structure underlying the financial part of the economy has been so badly eroded that we’ve arrived at a point almost of “anything goes”, and certainly, one of great unpredictability.
The crisis of confidence now infects the whole of the US’s governance system, regarding this issue and perhaps other issues, too. From that perspective, having John McCain rushing around like drama queen makes the problem worse. But it is already bad enough.
What an amazing week. To see Bush apparently handing over control of the economy to a cabinet member, said cabinet member coming in with a massive blackmail demand against taxpayers, the congressional Democrats dancing to the tune of the big bankers, the congressional Republicans and McCain working hard to demagogue the issue, the economy heading south, and the US’s international reputation plunging even more rapidly… And all this, while the Chinese are doing their first space walk, and Russia has stuck a nail in the coffin of Bush’s lengthy campaign of coercive diplomacy against Iran…
And we haven’t even seen Friday’s news yet.

Dinner with Ahmadinejad

Yesterday evening I was one of about 250 participants in an interfaith iftar (fast-breaking dinner) and conversation hosted here in New York by the Iranian mission to the UN. The guest (and speaker) of honor was Iranian president Mahmoud Ahmadinejad. Other speakers included a number of US religious leaders from different faiths, the President of the UN General Assembly, Nicaragua’s Miguel D’Escoto Brockmann, and Norway’s former prime minister Kjell-Magne Bondevik. Both these latter spoke about the very deeply felt religious motivations for their engagement in public life.
I found Ahmadinejad much more impressive as an orator than I had expected. In t.v. clips he often looks a little ranty. But in life, it turned out he has a commanding rhetorical style. He has a much deeper voice than I’d expected, and used it with evident expertise regarding timing, modulation, and other aspects of oration. He spoke in Farsi, only occasionally looking down at notes. I suspect it was a speech he had delivered a number of times before in different settings?
Unfortunately the simultaneous interpretation was not great; but I imagine we non-Farsi speakers received a fair idea of the main points of what he said.
The format of the event was strange, and shifted a number of times as the evening progressed. The “main event” was set up as a panel discussion with five participants. The moderator said at the beginning that he would have a little bell he’d ring to keep each main speaker to seven minutes. And he promised there’d be time for questions from the floor afterwards.
So the first four speakers (and D’Escoto) all spoke their seven-minutes’ worth first. They made some very good points. Then Ahmadinejad spoke– for around 40 minutes.
But what, really, could one have expected? That he’d be “just another panelist”, speaking alongside the others? He is, after all, the President of a country…
And there was no time for questions.
Among the points raised by the four preceding panelists were their concerns about Iran’s human rights situation; about the non-transparency of Iran’s nuclear technology program; and about Ahmadinejad’s fierce opposition to Israel’s continued existence as a Jewish state and his denials of the broadly accepted facts about Hitler’s Holocaust. These panelists all, also, issued impassioned pleas for the United States’ differences with Iran to be resolved through peaceful means.
In his speech, Ahmadinejad pushed back forcefully on all the points of criticism the earlier speakers had raised. He said that citizens from the country that had invaded Iraq and Afghanistan, had supported Israel’s attacks against Lebanon and the Palestinians, and had been responsible for so many rights abuses in Iraq, Aghanistan and Guantanamo were in a poor situation to speak about Iranian rights abuses. (But besides, there weren’t any.) He said that citizens of a country that has a huge nuclear arsenal, some of which is close to Iran and pointed at it, are in a poor situation to say anything about Iran’s nuclear program, which “as we all know” is for solely scientific and peaceful purposes. He did not mention the Holocaust directly. But he did say that during World War 2 some 60 million people lost their lives (or he might have said 20 million? Unclear.) … And that the perpetrators responsible for all that killing had been Europeans– yet it had been the Palestinians who were forced to pay the price.
On Palestine, he talked at some length about the “Zionist occupation” of Palestine as having lasted for more than 60 years, and inflicting terrible harm on the Palestinians. He argued that at and after the creation of Israel five million Palestinians were displaced (a huge exaggeration of their numbers then, but less than the number of Palestinian refugees today)– along with one million Jews, presumably those from the Arab countries.
While expressing strong support for Judaism as a faith, he said that Zionism has nothing to do with Judaism and transgresses against it.
He spoke in a consistently religiously-based vein, lacing his speech with comments about “What would the Prophets have done if… ?” and expressing a lot of support for the world’s poor, hungry, and displaced. He also took the opportunity to accuse the US of being motivated by greed and indifference to the sufferings of others in Africa, the Middle East, or elsewhere. His religious views seemed to include considerable millennialism, but cast in a sort of interfaith vein: he seemed to be referring not only to the possibly imminent return of a Mahdi-like figure but also to that of a Christ-like figure. (I wish the interpretation had been clearer.)
At the end, there was no time for questions. Mary-Ellen McNish, the Executive Secretary of the American Friends Service Committee, presented Ahmadinejad with a reproduction of a famous painting by a 19th century artist, Edward Hicks, representing “the lion lying down with the lamb” and a bunch of other peaceable animals lying around, too. Then he left to catch his plane back home.
While he’s been in New York for the General Assembly this year, he has met with large numbers of different groups of people, including an MSM journalists’ group, yesterday morning.
McNish and some other Quakers, including Joe Volk, the head of the Friends Committee for National Legislation, have been among the faith group leaders in this country who have been participating in interfaith dialogue with Ahmadinejad and other Iranian regime figures for two or three years now. I haven’t talked with any of them since last night’s event, but I imagine some of them may be feeling that it’s a pretty long, slow process to get beyond the “opening statements.” But still, having these dialogues, and hanging in with them, is so much better than not having them– especially given how loudly the drums of an anti-Iranian war continue to beat in this country. Also, many of the points Ahmadinejad made about US policies have considerable validity. No-one should judge a situation of gross double standards on issues like human rights or WMDs to be fair or acceptable.
I was interested, too, to see both the fact and the nature of the engagement in the event by D’Escoto and Bondevik. D’Escoto spoke with huge passion about the need for human equality and caring for all of God’s children in all countries, of all faiths. I think it’s great to have a person with such views and such commitment steering the work of the General Assembly. (Ah, but how about the much more elitist and powerful Security Council? That would be even better!)

Curtains for Middle East ‘Quartet’?

It has been evident for several years now to people who watch the Palestinian situation closely that this strange bird the Middle East ‘Quartet’ that was tasked in 2002 with midwifing a speedy peace between Palestinians and Israelis and improving the lives of the Palestinians has failed. Miserably.
Now, a coalition of 21 western and international aid agencies that work in the Occupied Palestinian Territories has issued a stinging report that confirms that conclusion.
This matters.
During the six years the Quartet has existed, Israel’s implantation into the West Bank of colonial settlers and the completely segregated infrastructure that supports them has continued, and even in the past year accelerated. The Palestinians have continued to live lives tightly circumscribed by fences, repressive regulations, widespread arrest campaigns,and economic strangulation. A peace agreement is nowhere in sight.
I have always thought the Quartet was quite inappropriately constituted. It unites, under the explicit “leadership” of the US government, the government of Russia, the European Union– and the United Nations itself. It is a complete distortion of the relationship between the US and the UN to imagine that the UN, which represents the interests of all of humanity, should in any matter be actually subordinated to the supervision of the US government, which “represents” the interests of less than five percent of humanity.
That subordination needs to be ended by the Security Council.
So the US has a veto in the Security Council, and might be expected to use it in such a vote, just as it has used it so many times in the past to block international efforts to protect Palestinian rights?
Let it try.
The world is changing. If the US wields a veto to keep the UN in subordination to itself over this vital issue in world affairs, the consequences would likely be enormous.

Financial crisis, leadership, and governance

Nobody elected Hank Paulson. Prior to being named US Treasury Secretary in March 2006, he was the CEO of Goldman Sachs, so his credibility as someone who has the interest of the whole citizenry first and foremost in his mind is not necessarily high. We did, however, elect George W. Bush to be President, back in 2004. He is the one who has to be held responsible for the actions of all members of his administration, who answer to him. That certainly includes Hank Paulson.
So if the country’s financial system is in such a dire situation that it will take $700 billion of taxpayers’ money to sort it out, shouldn’t it have been the president who told us about that last Friday, at the point when the bailout decision was first announced?
Instead of which, Pres. Bush waited until last night– a full five days later– to make any public statements at all about the crisis and the bailout proposal.
I watched his performance on the t.v. last night, and found it terrifying.
If he was trying to “reassure” the markets and the citizenry, I cannot imagine that he succeeded in doing that.
I think Gail Collins was quite right to note this morning that that Bush was,

    reading his lines flatly and stolidly, like an announcer delivering a long public-service message about new parking regulations for the holiday season…
    There is, in a way, a kind of talent required to tell the nation that it’s teetering on the brink of disaster in a way that makes the viewers’ attention wander. Bush’s explanation about how the rescue bill would unclog the lines of credit made the whole thing sound less important than a Liquid-Plumr commercial.

Actually, I think his performance was even worse than she described it. Bush (like Wesley Clark, when I saw him talking about the financial crisis last week) seemed to talk about how the sub-prime mortgages got sliced ‘n diced and then atop them was built a whole shaky house of distinctly sleazy “derivatives” cards, as though he had no familiarity with any of these subjects at all, but was sort of talking about them in public for the first time ever.
And Bush has an MBA from Harvard? (And has been in charge of our country’s economy for nearly eight years, already?)
But it was even worse than that. His face was puffy, his hair a little bushy and ill-kempt, his expression that of a scared rabbit, his affect wooden. He looked as if he’d been having a rough day– or a rough week.
Understandable, perhaps. But he is the person whom, for better or worse, we elected to be the one to take charge of the administrative charge in crises like the present one. And he campaigned hard for the job, two times. So he has to take the responsibility.
And now, we’re in the middle of the election for his successor…
I have to say, first, that I think it’s completely inappropriate for any presidential candidate to be injecting himself (and thereby, the whole business of election-campaign politics) into the present situation of crisis-time economic governance. Neither John McCain nor Barack Obama has any responsibility under the law for dealing with the current crisis that is any greateer than that of any of the other 98 US senators. They are not the leaders of– or even, as far as I know, members of– any of the relevant Senate committees. Yes, they need to be kept informed of what’s going on in the negotiations in Washington (which are reported to be nearing completion.) But they are not members of the current congressional leadership. It is that leadership, the leadership of the administrative branch, and the heads of the Federal reserve and SEC who between them need to reach agreement on the size, terms, and modalities of the bailout package.
McCain’s rushing around acting as though he is currently the “leader” of something is childish at best, an active distraction at worst.
Reminds of a certain young member of our family… someone I’ll refer to only as A… who on one occasion when we came back from a family outing to discover raw sewage welling up into the finished basement of the house started rushing around with a face mask and wellington boots on, shouting “Nobody panic! It’s all under control!” … while the rest of us more quietly set about shoveling out the muck, calling the plumber and the water department, and generally cleaning up.
Actually, that was pretty funny both at the time and in retrospect. McCain’s behavior is definitely not funny.
And neither has Bush’s been on this crisis, so far. It seemed for the first five days after last Friday as if it was Hank Paulson calling the shots. Bush was almost completely MIA on the issue.
Reassuring, as an example of Constitution-based good governance of the country at a time of crisis?
I think not. Shades of 9/11 and the “Pet Goat”, or of Bush’s response to Hurricane Katrina (which famously included taking a bunch of time out to present a birthday cake to John McCain.)
And then, when the Hidden Imam of the White House finally did appear last night, his performance was, as noted, distinctly unreassuring, in style and in content.,
Steve Clemons blogged, quite rightly, that Bush’s performance,

    seems like a bad episode of “24.”
    What is shocking about the presentation by Bush — and the deal that is unfolding is that we don’t see any acceptance of responsibility for the failure of his team’s stewardship of the economy…
    We didn’t hear Bush say that it’s time to reverse the tax cuts that he put in place to help those who have already benefited from the perverse finance and housing bubble that was pumped up.
    We didn’t hear a firm commitment from Bush to help the working families who hold these sub-prime and adjustable rate mortgages to stay in their homes and to help stabilize the lives of hard-hit Americans, their neighborhoods and their jobs. All the while, the macro players and big firms and their stakeholders are bailed out…

Well, let’s hope the Democratic (and GOP) leaders in Congress have succeeded in working out a much more equitable form for the bailout than the one Paulson presented them with last Friday.
The big international players in the global economy don’t seem reassured by Washington’s performance on the crisis so far, either. That matters a lot, given the deep interconnections between the US and the rest-of-the-world’s economies.
Steven Mufson and Anthony Faiola wrote in the WaPo today,

    As the world watched Congress struggle yesterday with a plan to bail out the U.S. financial system, foreign leaders balked at similar fixes for their own economies, a few even dismissing the credit meltdown as an American problem. Some foreign investors who had previously provided crucial injections of capital remained on the sidelines.
    Senior U.S. officials, notably Treasury Secretary Henry M. Paulson Jr., have in recent days urged the leaders of other industrialized countries to help prop the global financial system. But the appeals have fallen short…

The NYT’s Eric Pfanner has some even worse news for Washington about the reaction from Germany to Bush’s speech last night.
He wrote,

    Trans- Atlantic sniping over the global financial crisis intensified Thursday after President Bush cited an influx of foreign money into the United States as one of the root causes of the tight credit market.
    Peer Steinbrück, the German finance minister, countered in a speech in Berlin that the conditions that gave rise to the current turmoil in the markets were allowed to develop because of a reckless pursuit of short-term profit and huge bonuses in “Anglo-Saxon” financial centers — along with a lack of political backbone to stand up to what he characterized as bankers’ greed.
    “Investment bankers and politicians in New York, Washington and London were not willing to give these up,” he said. “The financial market crisis is above all an American problem”
    The long-term consequences, Mr. Steinbrück added, could be serious for the United States. “The U.S. will lose its status as the superpower of the world financial system,” he told the Bundestag. “The world financial system will become multipolar.”

That sounds very serious to me.
The Wall Street Journal published a much broader article today (p.A3, behind their paywall), in which it looked at the reaction in numerous foreign capitals to the US financial crisis so far. The bottom line of the reporters who reported that one from Beijing, Berlin, and Seoul: “The troubles of the past several weeks seem to have done more than any downturn in recent decades to sow doubt about the U.S. approach.”
I’ll say.

US citizens’ resistance grows to greedy bankers?

There are signs that some influential US bankers and financiers are playing a greedy and self-centered game of, essentially, blackmailing the rest of the citizenry (and everyone else with an interest in the integrity of the US financial system) with their– the bankers’– non-cooperation in the bailout unless they continue to be able to lead their self-centered and completely irresponsible lifestyle and continue to be able to exercize their accustomed level of untramelled control over vast portions of the world economy and financial system…
See e.g. this quote from Bloomberg today (HT: Calculated Risk):

    Senate Banking Committee Chairman Christopher Dodd has proposed that the Treasury potentially receive equity stakes in some companies that sell assets to the government. The stakes would “vest” in an amount equal to the 125 percent of the dollar value of the loss realized by the Treasury on the sale of the assets.
    That type of “loss participation” proposal would endanger companies’ ability to raise private capital afterwards, Jeffrey Rosenberg, head of credit strategy research at Bank of America Corp. in New York, wrote in a report yesterday.

Or this, also from Bloomberg (HT: Moon of Alabama), about much-lauded investment whiz Warren Buffet:

    [Buffett] made it very clear that he would not have bought anything right now if he wasn’t confident Congress will do the “right thing” and approve the financial bailout proposal put forward by Treasury Secretary Henry Paulson.

That is, the bailout plan that would not include the US citizenry ending up getting any actual equity warrants in return for the massive generosity the financiers are requesting from us…
Paulson and Bernanke tried to ram their “no equity, no restrictions” plan through Congress early week without any further deliberation, discussion, or changes. Perhaps they and their financier friends were counting on two things to succeed at this: (1) Fear, and (2) The lovey-dovey relationships the banking world has built up with all the members of the relevant congressional oversight committess over the years, greased by often massive campaign contributions.
So far, the US Congress has dug in its heels and resisted the strong railroading blackmail/pressure being exerted on it by the Bush administration and the “community” of uber-rich (and right now, spectacularly unsuccessful) bankers and financiers in this country. This, in parallel with the resistance to the administration’s plans that has been exhibited in recent weeks by the (actually, US-constituted) government in Iraq…
It seems the Bushists’ ability to cow and intimidate their opponents has waned considerably?
We still, quite evidently, need a financial bailout/reform/restructuring plan. But let it be one that is fair to all stakeholders, including at the head of the queue the US citizens who’re being asked to sign on to the whole of the costs involved.
Oops. Maybe trying to ram this legislation through in the pre-election period wasn’t such a smart idea for the Bush administration people after all?
(Publishing note: I am writing this on an extremely slow internet connection, as provided by my hosts here in Lewes, Delaware. I’m a little web-deprived right now, but I’ll be back at a good connection in NYC by Thursday afternoon. Expect resumption of normal JWN posting at that point. In the mean-time, for updates on the global implications of the US financial crisis, read Calculated, Moon, Krugman, etc.)

Paulson’s Goldman Sachs bonuses…

…were earned for what? John Gapper of the FT has done some digging around, and found that in the period before Paulson quit being GS’s CEO to become US Treasury Secretary in May 2006, he was busy slicin’, dicin’, and repackagin’ those old mortgage-backed securities along with the rest of them.
Gapper found that GS’s regulatory filing for the first quarter of 2006 reported that,

    During the three months ended February 2006 and February 2005, the firm securitised $19.25bn and $15.24bn, respectively, of financial assets, including $18.15bn and $14.43bn, respectively, of residential mortgage loans and securities.

And GS had also by that time apparently acquired additional investments in mortgage-backed and other allegedly asset-backed (in-)securities and CDOs, including $22 billion of CDOs, $2.9bn of “asset repackagings and credit-linked notes” and $6.5bn of “mortgage-backed and other asset-backed” securities…
Well, I guess that for “Hank” Paulson, as everyone seems very chummily to refer to him, where you stand really does depend on where you sit.
Because yesterday, he was all over the airwaves denouncing as “irresponsible” the way in which the big banks and financial houses had been slicing’ and dicin’ all those worthless pieces of mortgage-paper junk.
Gapper also recalls that GS gave Paulson a performance bonus of $18.7 million for the first half of 2006.
Intriguing to see even such a dedicated free-marketer as John Gapper wondering in public whether,

    as a public gesture, Mr Paulson might consider handing that bonus over to the Treasury’s fund and lowering the US taxpayer’s bill by $18.7m?

The highest paid official in the US government is the President, at $400 million thousand (nice digs, Air Force One, helicopters, etc not included.)
I see John McCain today said during a campaign stop that “The senior executives of any firm that is bailed out by Treasury should not be making more than the highest paid government official.”
Not a bad principle, at all.

Washington’s ‘Air on a G-string’

No comment from Washington yet about Chinese President Hu Jintao’s explicit linking of help for the financial crisis to the question of Taiwan. However, Treasury Secretary Paulson and Fed chief Bernanke did engage this morning in somewhat public international consultations on the crisis with their counterparts from “Group of Seven” industrial nations.
This is interesting from a couple of perspectives. The “G7” is a quite idiosyncratically composed (and completely unaccountable) grouping of what are described as “the world’s leading industrial countries.” Until recently, it was known as the “G8”, but there was a proposal to kick Russia out because of the Georgia conflict; and it looks as if that has happened already.
But whether 7 or 8, this “G” grouping notably doesn’t include China– though it does include Japan, the US’s other mega-creditor on the international scene.
Today’s statement about the actions the various G members have taken has the air of a slightly self-congratulatory group hug:

    We strongly welcome the extraordinary actions taken by the United States to enhance the stability of financial markets and address credit concerns… We also strongly welcome the measures taken by other G-7 countries…”

But unless they can find a way to include China and Russia in the planning for the stabilization program, it probably can’t get very far.

China’s condition to bail out the US: Taiwan?

China’s President Hu Jintao has now explicitly linked his country’s readiness to show good cooperation in resolving the US financial crisis to the question of Taiwan.
Beijing’s official Xinhua news agency reported today that Hu and Pres. Bush conferred thusly about the crisis yesterday evening (Washington time):

    Bush briefed Hu on the latest development of the U.S. financial market, saying his government was well aware of the scope of the problem, and had taken and would continue to take necessary measures to stabilize the domestic and world financial markets.
    Hu [said he] hoped the measures would soon take effect and lead to a gradual recovery of the financial market, which he said not only serves the interests of the United States, but also those of China, and benefits the stability of the world financial market and the sound development of the world economy.
    … He said China is ready to work with the U.S. side to intensify dialogue, exchanges and cooperation, and properly handle issues concerning mutual interests and of major concern, particularly the Taiwan question, in a bid to push forward the sustained and steady development of the Sino-U.S. constructive and cooperative ties.

A big, Renaissance-style flourish of the chapeau to Bernhard of MoA for picking up this very significant news item. Bernhard, not unreasonably, compared the prospect of a this deal-in-the-possible-making to the 1803 Louisiana Purchase (and thereby also, perhaps less plausibly, Bush to Napoleon. But oh yes, Napoleon did launch that mad, very destructive military adventure into Russia, didn’t he.)
I see no mention of this crucial phone call at the White House’s website. I wonder why not? All the WH has on the financial crisis today is this extremely contentless little statement.
On Saturday, I noted that China’s current investment in/exposure to the US markets includes around $900 billion held in T-bills and Fannie and Freddie stock. They also have substantial holdings in privately owned US financial entities.
Over at Bernhard’s blog, I commented that:

    Along with Taiwan [the Chinese] will probably over time request and may end up with the whole of the US military’s obligations on the Asian side of the Pacific Rim, along with the big naval platforms used to service those… Japan-China relations will become very important. What will Japan and S. Korea do? Go along with their big continental trading partner, I expect.
    But these things will not happen overnight. After the UK’s big end-of-empire overstretch (Suez, 1956) was “called” by Eisenhower the Brits, French and Israelis withdrew from Sinai fairly rapidly but it took a further 14 years for Britain to wind down its permanent naval presence “East of Suez.” This time, it might happen somewhat faster, but the inter-great-power readjustment of security forces and obligations in East Asia will probably still take the best part of a decade?

When I read Bernhard’s post, I was just sitting down to start composing a post on the dangers of the US public getting whipped up into a very unhelpful form of economic nationalism. I still believe that’s a real and present danger.
I can understand, certainly, the very reasonable fears and concerns of US citizens worried about losing “control” of big portions of the country’s economy to non-Americans who are not accountable to them in any way.
On the other hand, for decades now, the making of US national economic policy has been in the hands of shady and irresponsible financial institutions and the many legislators they’ve kept handily on their payroll, who have abandoned many or most of their obligations to remain accountable to the citizenry. So the change wouldn’t be as big as it might seem, anyway?
But as the bailout proposals get discussed in Congress this week, we need to see an outpouring of concern from Americans for the interests of the most vulnerable people who will be affected by the continuing economic downturn, both at home and abroad. As I wrote here recently, we really do have a chance to “Re-imagine America” at this time. But none of that will happen if our legislators aren’t kept strictly to the path of putting the people’s interests first, well before those of the Wall Street speculators who got the American (and world) financial systems into this mess in the first place.