Disturbing Scenes from the Tea Parties

Huffington Post has slide shows of the tea parties from yesterday.  I was quite disturbed by some of these images.  Here’s a small sample:

“American Taxpayers Are The Jews For Obama’s Ovens.”  I can’t even count the ways that’s offensive.  It’s probably the worst picture I’ve seen from these protests yesterday.

This one, comparing Obama to Hitler, is very nearly as bad.

“Guns tomorrow!”  Is this man advocating rebellion, like Rick Perry was?

So much for a post-racial society in the United States, at least for right now.  I know that racism exists, but that it would come out so easily and with so much vitriol really concerns me.

The Right Wing seems to have an extremist problem.  Homeland Security released a report about that a few days ago — a report that was begun under President Bush.  AmericaBlog has an excellent post on this.

I give examples below, from George Bush’s FBI and DOD, detailing the problem of far-right extremists infiltrating the US military, and trying to recruit former members of the US military. The media does all of us a disservice by not demanding the Republicans explain why they are now for us abandoning efforts to monitor a threat that George Bush himself pointed out to us.

[snip]

Department of Defense investigators estimate thousands of soldiers in the Army alone are involved in extremist or gang activity

From the Southern Poverty Law Center, 7/7/06:

Under pressure to meet wartime manpower goals, the U.S. military has relaxed standards designed to weed out racist extremists. Large numbers of potentially violent neo-Nazis, skinheads and other white supremacists are now learning the art of warfare in the armed forces.

Department of Defense investigators estimate thousands of soldiers in the Army alone are involved in extremist or gang activity. “We’ve got Aryan Nations graffiti in Baghdad,” said one investigator. “That’s a problem.”

This was George Bush’s Defense Department, Donald Rumsfeld’s DOD – they determined that thousands of extremists were at that time members of the US military. So the media needs to ask the Republicans what they are talking about. Do they think we should not keep tabs on Aryan Nation members of the US military?

FBI report: “White Supremacist Recruitment of Military Personnel since 9/11,” 7 July 2008

This is a report from George Bush’s FBI:

Although individuals with military backgrounds constitute a small percentage of white supremacist extremists, they frequently occupy leadership roles within extremist groups and their involvement has the potential to reinvigorate an extremist movement suffering from loss of leadership and in-fighting during the post- 9/11 period….

FBI reporting indicates extremist leaders have historically favored recruiting active and former military personnel for their knowledge of firearms, explosives, and tactical skills and their access to weapons and intelligence in preparation for an anticipated war against the federal government, Jews, and people of color. FBI cases also document instances of active duty military personnel having volunteered their professional resources to white supremacist causes….

A review of FBI white supremacist extremist cases from October 2001 to May 2008 identified 203 individuals with confirmed or claimed military service active in the extremist movement at some time during the reporting period….

According to FBI information, an estimated 19 veterans (approximately 9 percent of the 203) have verified or unverified service in the ongoing wars in Iraq and Afghanistan. Twelve of these have primary affiliations with the national organizations NSM (7), NA (4), and AN (1), six with skinhead groups, and one with white supremacist criminal gangs. FBI information indicates the activities engaged in by these individuals reflect those by veterans in the extremist movement generally since 9/11.

These reports are quite disturbing.  No one is saying that the Republican Party bears responsibility for these groups.  But they can’t say that the groups don’t merit watching.  They certainly do, whether they’re comprised of veterans or not.

These are scary times.  We’re involved in two wars, we’re dealing with a huge economic mess, and now we have a governor and a state senate talking about secession.  Whether you support President Obama or not, advocating the dissolution of the Union is at best counterproductive, at worst it’s criminal.  Saying that taxpayers are the Jews for Obama’s ovens and comparing Obama to Hitler is hyperbole in the worst way. 

Obama is nothing like Hitler, at least that we’ve seen thus far.  He hasn’t attacked a country.  He hasn’t rounded up millions of people and put them to death after working them nearly to death. 

I’m not ashamed to admit that I really did not like George W. Bush.  I still don’t.  I think most Democrats felt — and feel — the same way.  But you didn’t hear people on the Left talking about seceding from the Union or holding up signs saying that Bush’s foreign policy and tax policy compared favorably to sending Jews to the ovens.

Obama won the election.  Democrats won the election.  The Republicans need to be the loyal opposition, not cause more problems.  Offer real solutions, not advocate that it’s time for guns to be used because they don’t agree with the president’s tax policies.

Today’s Taxpayer Tea Parties

I haven’t talked about the tea parties going on today up to now.  For one thing, I really haven’t gotten the reason.  I get the motivation — to find something to rile up people against President Obama (talk about an Astroturf — fake grass roots — event) — but I don’t really get the aim.  (And I will leave aside the obvious jokes about tea bagging; that’s been done to death this week.  Probably best by Rachel Maddow.)  As best I can tell, it’s insanity.

The writer of an op-ed in the Los Angeles Times thinks it might be, too:

The Web is buzzing with information about how to throw an anti-Obama Taxpayer Tea Party, something organizers hope will be held today from Santa Monica to South Carolina. But no need to burn up your bandwidth reading complicated instructions. Here’s a simpler recipe:

Go to a hobby store. Buy a scale model of a U.N. One-World-Government Black Helicopter and a tube of glue. Toss the model kit. Sniff the entire tube of glue. You’re all set for the party.

I  can recall only a few outbreaks of such collective insanity as these tea parties in recent years. There was that time in the mid-1990s when a $19.95 video proving Bill Clinton was some sort of serial killer went viral. And then, a few years back, there was that chilling, televised midnight seance from the floor of the U.S. Congress aimed at reviving the long-brain-dead Terri Schiavo.

And now this. Whip out your Lipton and don your tinfoil hat and join the protest against … against … against what exactly?

The original Boston Tea Party was caffeinated by a very simple injustice: American Colonists refused to be taxed by a government that lacked any popular representation. That was remedied a few years later in a heroic struggle that stretched from Concord to Yorktown.

The original Boston Tea Party wasn’t about tea.  It was, as the writer points out, about taxation without representation (a situation, by the way, that still exists in the District of Columbia, but let’s leave that aside for now).  The colonists used tea to make a point.  And the colonists also threw boxes of loose tea, not tea bags, as today’s protestors threw.  I guess tea bags are easier to clean up.

Here’s what I don’t get: Everyone except the very rich is actually getting a tax break under Obama’s plan.  I got a tax cut; my paycheck today increased by about $20.  Not a huge sum, $400 a year, but I’ll take it.  And the tax rates affecting the very rich are still lower than when Ronald Reagan was president. 

So why are people out on the street having tea parties?

Or maybe they’ll do it for some other reason. The FreedomWorks site says the Tea Party movement began in reaction to President Obama’s corporate bailouts and ensuing yawning budget deficits. These same conservatives, however, were mum when George W. Bush erased our budget surplus and put us deep in the red by drunken spending on a pointless war in Iraq and by, yes, granting massive tax rollbacks for the loaded country clubbers who fund the GOP (and Armey’s FreedomWorks). Another bothersome detail: The bailouts were also initiated by Bush.

This is, of course, the irony (if you don’t mention the fact that Fox News basically promoted these events on their air) of this so-called tax protest.  These are the same people who didn’t say a word about their worries about the deficit.  How convenient it is for them to figure out now that deficits are bad.  I won’t lay all the blame for the deficit on Bush, but he and a compliant Congress during the first six years of his presidency deserve a large portion of the blame.

And while way too many otherwise sane Republicans are actively pandering to the tea-bag battalions, some old-fashioned conservatives are calling out the Teabaggers for their silliness. Writing in Fortune magazine, conservative policy analyst Bruce Bartlett, who has a long anti-tax history, says: “The irony of these protests is that federal revenues as a share of the gross domestic product will be lower this year than any year since 1950. … The truth is that the U.S. is a relatively low-tax country no matter how you slice the data.”

The Tea Party movement, more than anything else, is a rather garish display of a Republican right that seems to have lost not only the national elections but also any semblance of political bearings. Staying on this course, the GOP risks — in the words of one pundit — becoming “the Talk Radio Republican Party.”

Is the Right Wing so blinded by the hatred of anything Democratic that they can’t put aside some of this inane posturing and try to help the country get out of the mess it’s in?  Apparently so.  That’s what they’ve shown so far, since Obama took office.  More’s the pity, too. 

By the way, calling Obama a fascist — as some did today — is laughable.  George W. Bush (or maybe I should say Richard B. Cheney) was a good deal more fascist than Obama is.  First Obama is a socialist, then he’s a fascist.  News flash:  Obama is neither fascist nor socialist.  If you want to see what socialism is, read about Eugene Debs.

This is just more of the same from the Right.  The Republicans are bereft of leaders and ideas.  So all they can do is protest what Obama does and try to obstruct his policies.  It’s a dangerous strategy for the Republican Party both for its future, and for the country’s future as it tries to get out of the messes we’re in, most of which were left behind by a grossly ineffective administration.

Is This 1931?

Here’s the counterbalance to the Washington Post/ABC News poll that was released this morning.  Paul Krugman, who won a Nobel Prize for economics, says that there is no recovery in sight.  It’s not exactly cheery news.

Looking at his graph, you can see the slight uptick in 1931, then the slide continued.

According to his blog post on the New York Times website, there is no recovery coming either this year or next.

I’m detecting a trend in commentary that I find slightly ominous. Some of the economic news lately has been slightly better than expected, which was bound to happen at some point (on average, after all, half the news should be better than expected). Mostly this is in the form of things getting worse more slowly, but it wouldn’t be surprising if we see, say, an uptick in industrial production in a few months, as the inventory cycle runs its course.

If so, that doesn’t mean the worst is over. There was a pause in the plunge in early 1931, and many people started to breathe easier. They were wrong.

So far, there’s nothing pointing to a fundamental turnaround this year, or next, or for that matter as far as the eye can see.

As I said, that’s not cheery news.  It directly contradicts the optimism that some people are starting to feel again.

Another cheery post from Krugman:

So in 2007 the Pension Benefit Guarantee Corporation — which stands behind corporate pensions — switched from bonds only to lots of stocks, buying in at, natch, the peak of the market. Oops. And this is big stuff: the Bush administration may have left us all a gratuitous loss of hundreds of billions.

Why did this happen? I’m sure we’ll find some nasty stuff, but at least part of the reason was that the Bush administration, like many conservatives, was under the spell of the following pseudo-syllogism:

1. The stock market captures the essential spirit of capitalism.

2. Capitalism roolz!

3. Therefore, stocks will go up.

The most influential disseminator of this fallacy is the Wall Street Journal, which as far as I can tell has cheered on every bubble since the 1920s, always dismissing the skeptics as fools and promoting the dumbest bull-market arguments available. I don’t have time to search for it right now, but I think there was an editorial circa 2000 saying precisely that anyone who questioned the bull market of the time was anti-capitalist.

And now the cost for that attitude is falling on you and me.

Another blessing from George W. Bush.

I admit.  I was one of those people starting to feel that maybe — just maybe — there was a light at the end of this tunnel.  It looks like that isn’t the case and that Krugman — as much as I hoped that he would be wrong — is right and we’re going to have a lost decade.

Poll: Americans More Optimistic

SOURCE: Washington Post-ABC News poll | The Washington Post - March 31, 2009

The Washington Post and ABC News have a new poll out this morning.  President Obama continues to get high marks. 

The graph at the right shows public opinion as measured in this poll.  I believe that the poll is a validation of the job that Obama is doing.  What’s striking, too, is that more and more people now say that the nation is headed in the right direction — the number of people saying that the country is headed in the right direction has almost tripled since December.

Also, public perception is that Obama is not to blame for the economic downturn.

At this early stage in his presidency, Obama continues to benefit from a broadly held perception that others should bear the bulk of responsibility for the severe economic problems that confront his administration. Americans see plenty of offenders, but only about a quarter blame the president and his team for an economy that’s in the ditch.

Despite the increasing optimism about the future, the nation’s overall mood remains gloomy, and doubts are rising about some of the administration’s prescriptions for the economic woes. Independents are less solidly behind Obama than they have been, fewer Americans now express confidence that his economic programs will work, barely half of the country approves of how the president is dealing with the federal budget deficit, and the political climate is once again highly polarized.

(I worry about the deficit, too.  It has gotten to be enormous and is adding debt that my son and his children will be paying off for years.  It’s the lesser of two evils, though; the economy really needs the kick.  I do want to know more about Obama’s budget.  It is huge and we need to understand it better.)

The partisan divide, as the Post calls it, is getting worse:

There is now a pronounced divergence between Democratic and Republican perceptions of the economy, a bigger partisan divide than the one that occurred 16 years ago after Bill Clinton took office. In early 1993, people in both parties were about equally likely to see the economy as improving, but now the number of Republicans who say it is souring is more than double that of Democrats.

A sharp rise in optimism has occurred among Democrats, who are about three times as likely to approve of the country’s course as they were just before Obama’s inauguration. Independents, too, are more optimistic, with twice as many feeling positive as in mid-January. Among Republicans, there has not been significant movement in either direction.

I don’t really think that’s a surprise.  For all Obama’s talk of bipartisanship and post-partisanship, not much has changed in Washington.  I don’t ascribe that to Obama, though; I believe that the Republicans carry the blame for that.  They have been a party of obstruction rather than constructiveness.  (Consider the farce that was the Republicans’ budget offering that wasn’t really a budget offering.  They had a press conference for a budget that contained no numbers.  They promised more details next week when called on the problems with their document.)

All in all, Obama continues to benefit from the perception that he is not to blame for the crises with which he is dealing.  His job approval ratings remain high, and people seem to be more optimistic than they were when Obama took office.  That confidence will be critical for the country to dig itself out of this economic morass.  Obama isn’t perfect.  But he’s doing a pretty good job at the moment and people get that.  There are a few worries — the deficit chief among them — but this is good news for Obama.

GM CEO Steps Aside

President Obama asked GM Chairman Rick Wagoner to step aside.  Wagoner did, resigning this morning.

What got me thinking were some comments from the Washington Post political chat:

Houston, Tex.: Obama has ordered the outing of one car company to resign and is ordering a second car company to join with a foreign car company. These actions are shocking and scary – he is the president of the US – not the president of these companies. Obama only answers to the voters once every 4 years; while company presidents must answer to shareholders every year and Wall Street every business day. More importantly, Obama is NOT a busines [sic] man. Granted, these companies have not been operated well, but Obama has even less experience then them. There were screams of power grabs over the actions of President Bush – were are the screams of outrge [sic] and out and out power grab by the Obama administration??

Arlington, Va.: Isn’t “President fires CEO” as troubling as “Pope fires missile”?

Free market capitalism, despite it’s [sic] obvious flaws, has lifted more people from poverty than anything in history. When the president can hire and fire CEOs from corporations, we’re no longer a free market capitalist society. GM is clearly a disaster, but it’s up to their board and shareholders to make those decisions. Obama is clearly just helping his union buddies, but he’s destroying the foundation of our economy as he does it.

Is there anything the Supreme Court can do about it? Isn’t this clearly beyond his constitutional duties? Or, because they’re saying he “resigned”, is Obama safe (and the rest of us doomed)?

it seems from what I read that Wagoner is officially stepping aside, not being fired by the president.: That is also the official line Russia and Venezuela, etc., use when removing CEOs from businesses they dislike. This is a very scary precedent Mr. Obama is setting. Very scary.

Those are valid concerns.  Here’s the thing, though.  So what?  GM went to the government, hat in hand, looking for a bailout.  They got one with some conditions.  The conditions were not met; the business plan that GM presented was lacking, in the government’s estimation.

The government is the steward of taxpayer dollars.  It has an obligation to spend them well.  We can debate all day whether these companies should have been bailed out to begin with, but they were indeed bailed out. 

This is what should have happened when GM, Chrysler, AIG, etc., came looking for bailouts.  Their executive suites — CEO, COO, CFO — along with their entire boards should have been fired as a condition for getting government money.  If you want our money, heads must roll.

I know Obama isn’t a business person.  (A straw man argument if there ever was one — there’s no way he didn’t make this decision without a lot of input from people who were in business.)  But he is doing what needs to be done.  Don’t feel badly for Wagoner.  He’s doing fine personally.  He did not do a good job over the past several years for GM.  He deserves to be fired or to be asked to resign.  It shouldn’t have taken this long for it to happen.

Jobless But Can’t Qualify for Aid

The Los Angeles Times story this morning on not being down and out enough to qualify for public assistance is disturbing.  That people can’t qualify for Food Stamps because their unemployment payments put them $36 over the limit is simply ridiculous.

Earlier this month Caroline Sabey crossed a threshold she never imagined she would see: the Los Angeles County Department of Public Social Services.

The single mother had been laid off in February from her $55,000-a-year job as an executive assistant. Almost immediately, Sabey, 42, struggled to make ends meet. She went to the county hoping to get money to buy food for her two young sons.

By asking for help, Sabey joined a growing number of middle-class families applying for government aid only to discover that their safety nets — savings, severance packages, unemployment payments — put them at a disadvantage in a system designed to serve the very poor.

At the crowded Chatsworth Social Services office, Sabey waited hours. Caseworkers had her apply for food stamps and CalWorks, which offers cash benefits for families.

Late last week she was told her application was denied. Her monthly unemployment payments of $1,943 put her $36 over the federal income limit for food stamps. The monthly income limit for a family of three for CalWorks was even lower.

I recognize that limits must be in place to protect the taxpayers from abuse.  But $1,907 per month strikes me as an arbitrary cutoff point; it was probably conceived in some Congressional conference committee as a compromise to get a bill passed and signed.

County officials say Sabey’s story is increasingly common. At a meeting earlier this month of the county’s Commission for Children and Families, participants were startled when Miguel Santana, a deputy to the county’s chief executive, told them caseworkers are turning away those who are not already “living in their cars.”

Santana later said that he had exaggerated a bit, but only to underscore how stressed the system is. He called the system for determining benefit eligibility “a very ineffective way of helping people” that “doesn’t consider this very unique circumstance we are in.”

“A lot of these folks, once the economy picks up again, are going to be able to land on their feet,” Santana said. “But it’s going to take a while. What’s going to happen in between?”

Of course Santana’s question is rhetorical.  But I’ll answer it.  There will be a lot more formerly-middle-class Americans living in their cars with their children.

Philip L. Browning, the county’s director of social services, said the increased denials reflect an overall surge in applications for assistance in recent months. Although the largest spikes in demand for aid were in working-class and low-income communities, middle-class areas also saw significant increases.

But to qualify for CalWorks, a family of four cannot earn more than $1,218 a month or have more than $2,000 in cash or property, not including their home. If they have a car worth more than $4,650, the added value counts as property. To qualify for food stamps, an application that takes into account monthly living expenses such as rent and utilities, the same family cannot earn more than $2,297.

Those limits pretty much rule out middle-class families.  Living in one’s car, as Santana says above, isn’t too much of an exaggeration.

Most middle-class applicants are not interested in Medi-Cal, Social Services staff said — they need food stamps and cash to pay the mortgage.

“They come in because they’re at their wits’ end. They’re already beginning to lose things, and they want to make sure they can feed their children. This is really a last stop for them,” said Carlos Perez-Carrillo, an eligibility supervisor in the Panaroma City office. “These are career people. You can tell by the way they dress. They have been working all their lives, and they’re coming in here broadsided, just really confused.”

And their last stop, apparently, cannot help them.  At least until their situation gets worse.

“‘I’ve paid my dues.’ That’s what they say, ‘and you don’t want to help me,’” Perez-Carillo said. “I’ve been doing this for about 18 years, and this is the most difficult I’ve seen it.”

If someone is denied benefits, caseworkers refer them to food pantries, homeless shelters and private charities and advise them to return in a month if their situation worsens. Often, they return and qualify, Perez-Carrillo said.

[snip]

Why, she said, can’t Social Services be more flexible with people like her who almost qualify?

She has cut back on everything she can — got her grocery bill down to $65 a week, her utilities down to about $40 by dimming the lights and taking fewer baths. Although she qualifies for federal assistance for her heat and gas, it will not start until April and won’t pay if she gets cut off before then.

Sabey, who had a sheltered childhood and never before experienced financial distress, was surprised that the referral list she got from Social Services included a homeless shelter for single mothers. She had no idea such places existed.

“Why are we allowing single mothers to get to that point?” she said. “Why aren’t we doing something?”

It’s beyond just single mothers.  What kind of country lets people fall through the cracks like this?  What kind of country requires people to be essentially bankrupt before they can get some help?  Here in America, we’re supposed to do better. 

For a social liberal, I’m pretty ambivalent about entitlements.  I think that Social Security and Medicare are heading for crashes and need to be fixed if we want to keep them.  I agreed with Welfare reform.  But I am not comfortable with people like this falling through the cracks. 

I understand that resources are finite.  I understand that there must be limits on entitlements.  But these are not ordinary times.  People need help.  The stimulus bill included such help, but it won’t get to the people who need it because the underlying law wasn’t temporarily changed.  These are people who have paid their taxes their whole lives and now that they need some of the benefits they’ve supported over the years, the door is shut in their faces.  That is wrong and it is not okay.

AIG Bonus Flap Fallout

The fallout from the knee-jerk reactions to the AIG bonuses has begun.  Employees are now resigning.  I’m sure some believe that this is a good thing — AIG has caused a huge mess and its employees should suffer.  The only problem with that is that the employees who actually caused the company’s problems are long gone and the ones who are left — the ones getting the bonus payment — are the ones trying to clean up the mess.

The resignation letter from Jake DeSantis to Edward Liddy that appeared on today’s New York Times op-ed page is a must read.  DeSantis lays out the internal problems in AIG, including one of the biggest: Mr. Liddy does not have his employees’ backs.  He will hang them out to dry at the first sign of a piqued elected official.  That’s no way to run a company.  Why didn’t Liddy stand up and forthrightly explain why the bonuses had to be paid?  The bonus flap was handled poorly as a matter of public relations and was handled poorly as a employee relations.

Some choice bits from DeSantis’s letter (but do read the whole thing):

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials.

It’s absolutely a betrayal by Liddy of his employees.  I’m sure it would have been much more difficult to back them before an angry Congressional committee, but that’s what he needed to do.

I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.

The public was not told that people like DeSantis were also basically working for free.  We were simply told that these “best and brightest” traders were going to be making huge bonuses.  The implication, of course, is that the fat cats were getting fatter and the rest of the American economy was still spiraling with more people losing their jobs.  Is it any wonder that so many people were so angry?

I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.

Liddy is indeed being wrongly pilloried for the job he’s trying to do.  He should answer, though, for the way he threw his employees under the bus.

But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.

My guess is that in October, when you learned of these retention contracts, you realized that the employees of the financial products unit needed some incentive to stay and that the contracts, being both ethical and useful, should be left to stand. That’s probably why A.I.G. management assured us on three occasions during that month that the company would “live up to its commitment” to honor the contract guarantees.

That may be why you decided to accelerate by three months more than a quarter of the amounts due under the contracts. That action signified to us your support, and was hardly something that one would do if he truly found the contracts “distasteful.”

That may also be why you authorized the balance of the payments on March 13.

At no time during the past six months that you have been leading A.I.G. did you ask us to revise, renegotiate or break these contracts — until several hours before your appearance last week before Congress.

I think your initial decision to honor the contracts was both ethical and financially astute, but it seems to have been politically unwise. It’s now apparent that you either misunderstood the agreements that you had made — tacit or otherwise — with the Federal Reserve, the Treasury, various members of Congress and Attorney General Andrew Cuomo of New York, or were not strong enough to withstand the shifting political winds.

You’ve now asked the current employees of A.I.G.-F.P. to repay these earnings. As you can imagine, there has been a tremendous amount of serious thought and heated discussion about how we should respond to this breach of trust.

This is the crux of the matter.  Liddy has breached his employees’ trust.

We can debate all day about whether the bonuses should have been promised — much less paid.  (I believe they should have been.)  It seems to me, though, that there wasn’t anything wrong with the bonuses themselves, except that they were called “bonuses” instead of something more in line with what they really were.  Something, perhaps, like “deferred salary”, which may have been more accurate.

What was wrong was the way that they were initially explained — as retention bonuses.  The public was not told what these payments actually were, and went to the garage for pitchforks and torches.  Politicians, of course, got wind of this and immediately began fanning the flames and began debating a bill of attainder designed to punitively use the tax code to exact a pound of flesh.

My initial reaction was also anger.  That anger was misplaced.  I still think some righteous populist anger can be a very good thing.  But in this case, people need to put the torches and pitchforks away and save them for the politicians who cravenly fanned these flames, and save them for the news media that didn’t report the whole story.

More on Populist Outrage and the AIG Bonuses

AIG and the government really messed up the public relations of the bonuses.  And since AIG has had their problems after receiving federal bailout money (lavish parties, other big bonuses), it really tapped into the rage people feel about the corporate bail-outs in general.  So people promptly went ballistic.  Rightly so, I think.  But now it’s time to calm down a bit.

I tend to bristle a bit when people talk about populism — real populism, that is (not what’s passing for outrage these days in Congress and in the White House) — condescendingly.  Populism is not a dirty word.  We have a government that is — or a least supposed to be — of, by, and for the people.  People in Washington tend to forget that.  And what Congress is trying to do by “clawing back” these bonuses is a lie, like so much else that happens in Washington.

If this whole bonus payment had been better explained to the taxpayers, I don’t think this kind of outcry would have happened.  But poor public relations, as I say, has been a hallmark of the bailout, especially by AIG.

What Congress (especially the Democrats) is doing right now is idiotic and disingenuous.  They allowed the provision allowing the bonuses to be put into the law.  They can’t now claim ignorance and try to piously ride the wave of outrage that’s sweeping the country.  Besides, what Congress is trying to do by limiting these bonuses is a knee-jerk reaction and is not well thought out.  And, of course, it may be unconstitutional.  (Bills of attainder are outlawed in the Constitution.)

As I said earlier this week, this kind of bill seems un-American.  We don’t go after people’s money after the fact.  Also, as people have pointed out to me this week: The people who caused this mess are no longer at AIG.  They’ve been fired.  The people who received these bonuses are the ones left behind to try and clean up the mess.

They’ve been unfairly vilified by the outrage, and Congress’s rush to assign blame.  From a Washington Post article:

The handful of souls who championed the firm’s now-infamous credit-default swaps are, by nearly every account, long since departed. Those left behind to clean up the mess, the majority of whom never lost a dime for AIG, now feel they have been sold out by their Congress and their president.

“They’ve chosen to throw us under the bus,” said a Financial Products executive, one of several who spoke on condition of anonymity, fearing reprisals. “They have vilified us.”

They say what is missing from this week’s hysteria is perspective. The very handsome retention payments they received over the past week were set in motion early last year when the firm’s former president, Joe Cassano, was on his way out the door. Financial Products was already running into trouble on its risky credit bets, and the year ahead looked grim. People were weighing offers from other firms, and AIG executives feared that too many departures could lead to disaster.

So AIG stepped in with an offer to employees of Financial Products. Work through all of 2008, and you’d get a lump payment in March 2009. Stick around through 2009, and you’ll get paid through 2010. Almost all other forms of compensation — bonuses, deferred payments and the like — have vanished.

“People are trying to do the right thing,” the same Financial Products executive said. “Guys have worked their [tails] off to try to get value for the taxpayer. This isn’t money that’s being advanced to us. People have performed the work and done it exactly as we asked them to do.”

Pasciucco cringed at the notion, articulated by many lawmakers and even President Obama, that Financial Products is a firm of nearly 400 reckless and greedy derivatives traders.

It’s clear that AIG has messed up.  Repeatedly.  It’s also clear that if we’d gotten the above explanation of what these payments were before they were paid, there wouldn’t have been such a hue and cry.  This kind of bonus is commonplace in corporate America, and it seems to be quite fair despite the amounts.

I’ve been guilty of feeling the anger that many people are feeling these days.  In this case, though, I think it’s time to put down the torches and the pitchforks and get a little perspective, as Steven Pearlstein writes this morning:

At the end of the day, the thing to get outraged about is not the $440 million in bonuses at AIG or the $10 million that Citigroup is spending to redesign its shrunken executive suite. These may seem like princely sums, but they are almost insignificant compared with the real outrage: the hundreds of billion dollars of taxpayer funds that have been put at risk to keep AIG and Citi from failing and taking the whole financial system down with them. Let’s keep our attention on the elephant rather than the pimples on its behind.

I realize that collective expressions of public anger can serve a useful purpose. At times like these, it feels good and is a way for a political system to let off some steam before a more dangerous explosion occurs. More importantly, it builds political momentum for sweeping reform of the regulatory apparatus while scaring the bejeezus out of people on Wall Street, who will now think long and hard the next time they get the urge to take excessive risks with other people’s money.

But there’s a danger in letting this outrage get to the point that it undermines the effort to contain the financial crisis. And with Congress now rushing to pass legislation taxing away the bonuses of every banker at every bank or financial institution that takes government money, that point seems to have been reached.

I fully agree.  These bonus claw backs are ill advised.  They’ll probably pass, but President Obama should not sign them.

A few things to keep in mind.

First, as I’ve said in the past, this isn’t about fairness. There’s nothing remotely fair about using taxpayer money to rescue a free-market financial system from the mistakes of the financiers. But the reality is that we can punish the bankers or we can save the banking system, but we can’t do both at the same time.

Nor is it fair, as The Great Santelli has declared on CNBC, that homeowners who have paid their bills and have been careful not to take on too much credit are now being asked to provide relief to homeowners who have not. Unfortunately, the price of righteous indignation is a wave of foreclosures, a further decline in home values and billions of dollars of additional loan losses at banks that are already on government life support. Given the financial and economic hits they have already taken, that’s a price that most “innocent” homeowners and taxpayers would probably prefer not to pay.

During a financial crisis, fairness is a luxury we cannot afford. During the 1930s, bankers and financiers lost everything, but the outcome — a decade-long depression — was hardly fair to the ordinary American. The key question is not whether something is fair, but whether it helps get us through this mess faster and at a lower cost.

At the moment, the Treasury is working (and working and working) on ways to entice private capital back into the banking and shadow-banking system by offering government financing and guarantees against losses. Every dollar of private capital that can be attracted back into the system is a dollar that the Treasury won’t have to borrow or the Federal Reserve won’t have to print. And only with the return of private capital will the government be able to get back the rescue money it has committed.

But how eager do you think private equity and hedge funds will be to invest those billions of dollars if they fear that their participation will subject them to front-page accusations, congressional inquiries and public outrage over how much they might be paying for bonuses or employee travel or office decoration? Will they participate if they think that Congress, in a moment of populist pique, will try to tax back their profits if they earn more than originally expected?

As the financiers see it, there’s a big difference between the government that sets tough terms for participation in its financial rescue programs and a government that is a fickle and unreliable partner, that tries to micromanage their businesses and changes the rules of the game with every zig and zag of public opinion. That may be an exaggerated view, but it is the financiers’ view and one we need to be mindful of, since at this point we need their money and cooperation as much as they need ours.

We now own AIG (and Citigroup and all the others).  We have invested a bunch of money trying to recapitalize these banks.  We need them to stay alive to clean up the mess, and then perhaps be broken up.  I’m a taxpayer.  That money is my money (and my son’s and my grandchildren’s).  I want it back.

A final point on outrage: We need to save some of it for ourselves. While it was Wall Street that got rich by peddling new ways for Americans to live beyond their means, the decision to do so was ours. It was we who ran up the credit card bills, we who drew down the equity in our homes and we who refused to tax ourselves for the government services we demanded. Wall Street bankers may have been the pushers, but it was we Americans who became addicted to the easy credit.

Pearlstein’s last point is well taken.  American consumers lived far, far beyond their means.  Yes, they were aided and abetted by Wall Street, but Wall Street didn’t force people to buy new cars or flat screen televisions.  This is the reckoning that is coming from all of those excesses. 

So yes.  We’re right to be angry about the bailouts and the way they’ve been handled.  People in Washington need to remember the power of the people and that populism isn’t a dirty word.  But we also need to be angry at ourselves.  We helped cause this mess.

Populist Anger Toward Wall Street

The outrage directed toward Wall Street — and especially toward AIG in the last few days — is well placed.  It’s derided in some quarters as just populism, like populism is a bad thing.  I don’t think it is, not right now.

The latest furor over the bonuses paid to AIG executive is so loud because it’s the latest in a long line of outrages.  AIG has been especially tone deaf, receiving $170 billion in taxpayer money and still holding lavish retreats and parties, and still paying exorbitant bonuses.  The automotive company executives came to Washington with their hands out, and they came in private jets.  Merrill Lynch paid huge bonuses right before their forced marriage with Bank of America.  (And Merrill’s CEO spent huge amounts on an office renovation just before his company died.)  All this, of course, from the very people who created these complex credit default swaps and collateralized debt obligations and ran our economy into the ground.  (There’s my populism there.)

No one is saying that Wall Street did it alone.  Low interest rates made it very easy for American consumers to take huge amounts of cash out of their homes and to run up large debts buying things they probably didn’t need and living far beyond their means.

EJ Dionne makes some excellent points in his Washington Post column from this morning.

We are at the beginning of a great popular rebellion against those who showed no self-restraint when it came to lining their own pockets. Their entitlement mentality arose from an inflated sense of their own value and of how much smarter they were than everyone else.

The sound you are hearing in response to the AIG payoffs — excuse me, bonuses — is the rancorous noise of their arrogance crashing to earth.

Yet there is much hand-wringing that this populist fury is terribly perilous, that the highfliers who could not control their avaricious urges have skills essential to repairing the damage they caused in the first place.

Beware populism, we are told. Honor those AIG contracts. Forget about any moral reckoning and just fix the economy.

This view is wrong on almost every level, especially about populism. Of course not all forms of populism are attractive. But as historian Michael Kazin argued in “The Populist Persuasion,” the “language of populism in the United States expressed a kind of idealistic discontent” and “a profound outrage with elites who ignored, corrupted and/or betrayed the core ideal of American democracy.”

Is this not an entirely appropriate reaction to elite decisions dating to the 1980s that ultimately ran our economy into the ground?

[snip]

A study of compensation levels in 2007 found that average CEO pay at S&P 500 companies was 344 times higher than the average worker’s wage, and that the top 50 investment fund managers took home 19,000 times — yes, that’s with three zeroes — as much as typical workers earned.

Now, I am not against people getting rich or entrepreneurs reaping profit from their investments of time and energy. But there is no moral or practical justification for such levels of inequality. Capitalism worked extremely well in the three decades after World War II without such radical inequities. It’s when inequalities soar that the system runs into trouble — precisely what happened at the end of the 1920s, when inequality reached levels similar to today’s.

I’m not against people getting rich, either.  Fair pay for fair work.  Some people should make more money than others.  They have different skills and different education levels.  But some those amounts of money are obscene.  Perhaps this is my Democratic ideal coming out, but doesn’t a society need to make something other than money?  Isn’t a vibrant middle class essential for a healthy America?  There is no long-term health for the middle class when the distribution of wealth is that far out of whack.

More Dionne:

With the populist furies unleashed, the Obama administration has two choices. It can try to fight the public. Or it can use the public’s outrage to move the country in a better direction.

Rep. Barney Frank (D-Mass.), the chairman of the House Financial Services Committee, points to the irony that populism threatens to work against Obama even though the president has proposed “a populist budget.” It’s a budget that raises taxes on the wealthy, cuts them on almost everyone else and spends money on programs — notably health care — that are of benefit to the poor and the middle class. Obama needs to show that his budget is itself a direct response to the injustices aggravating the country.

The president needs to do two things at once. The administration has no choice but to spend piles of money to unwind the financial mess. A share of the largess, as Frank acknowledges, may indirectly benefit some of the malefactors in this saga. But Obama has to be unambiguous in asserting that the purpose of this spending is not to reward those who got us into this fix but to solve a problem that affects us all.

To make this case, the administration should be unafraid to use its proposals on health care, taxes, education, energy and financial regulation to argue that it is building a new economy on the ashes of the old — an economy based on fair rewards to capital and labor alike, not on an ethic of greed and excess.

Obama can work with the populist wave or he can be overwhelmed by it. As Kazin notes, American progressives have succeeded in improving the “common welfare” only when they “talked in populist ways — hopeful, expansive, even romantic.”

Kazin cites the line popularized by Ralph Waldo Emerson, “March without the people, and you march into the night,” and then adds: “Cursing the darkness only delays the dawn.”

The recession will correct many of these excesses.  But there needs to be a healthy does of change coming from Washington, too.  People are angry, and it’s not the mock outrage that passes for anger in Washington.  Voters’ memories are usually short.  I don’t think that will be the case this time.  Too many people are being hurt and are too angry about it.  America’s leaders should either use that populist anger or be run over by it.

Stripping AIG Executives of Their Bonuses

I’m angry at AIG.  I’m angry at the mismanagement that got them into the mess they’re in.  And I’m angry that the taxpayers have given AIG about $170 billion and now own about 80% of the company.  But that’s the reality these days.  (A bit of history — the AIG bailout was conceived and executed about a year ago.  Under President Bush.  So laying all of this on Obama is disingenuous at best.)

AIG, it has to be said, has not played a good public relations game.  They’ve had huge, lavish parties for their agents, paid bonuses and now are paying even more bonuses.  This time it’s $165 million, paid to the executives of the financial division that basically took AIG down.  And this time it’s coming on the heels of a $61.7 billion loss last quarter.  AIG isn’t in the financial position to be paying bonuses, contracted obligations or not.  By all rights, they should be in bankruptcy at the moment, where those contracts would have been voided.  But because the US Government stepped in, these guys get their bonuses.  It defies logic. 

Those executives should stand up and say that they won’t accept them, or will give them to charity, or something.  But they shouldn’t benefit financially from their failures and the taxpayers’ largesse.

That brings me to the noise going on in Congress at the moment, which I view as misguided kneejerk sputtering.

From an AP article:

Congressional Democrats vowed Tuesday to all but strip AIG executives of their $165 million in bonuses as expressions of outrage swelled in Congress over eye-catching extra income for employees of a firm that has received billions in taxpayer bailout funds.

“Recipients of these bonuses will not be able to keep all of their money,” declared Senate Majority Leader Harry Reid, in an unusually strong threat delivered on the Senate floor.

“If you don’t return it on your own we will do it for you,” said Chuck Schumer of New York.

The bonuses were paid legally, part of a program that had been disclosed in advance in filings that American International Group Inc. made with the government.

House and Senate Democrats were crafting separate bills to tax up to 100 percent of generous bonuses awarded by companies rescued by taxpayer money. Republicans said President Barack Obama’s administration should have done more to stop the bonuses.

As I said above, I share the outrage.  But crafting legislation after the fact — when the government knew about these bonuses beforehand — is punishment.  It’s deserved, but it does not sit well with me.  The government, when it agreed to bail AIG (and Citigroup and Bank of America, and GM — to name a few) should have made AIG void those contract provisions before the firm received the government money.  That they didn’t is the fault of the Bush administration.

The AIG executives need to voluntarily return the money.  They failed and they need to admit that.  But Congress can’t — and shouldn’t — do that for them.  The outrage is well placed.  The remedy strikes me as half-baked, un-American and probably unconstitutional.

Update:  Thanks to Andrew Cuomo — the Attorny General of New York — we now know who got these bonuses.  There were 73 employees who got the $165 million.  From Cuomo’s office:

• The top recipient received more than $6.4 million; 
• The top seven bonus recipients received more than $4 million each; 
•  The top ten bonus recipients received a combined $42 million; 
• 22 individuals received bonuses of $2 million or more, and combined they received more than $72 million; 
•  73 individuals received bonuses of $1 million or more; and 
• Eleven of the individuals who received “retention” bonuses of $1 million or more are no longer working at AIG, including one who received $4.6 million;

Again, these payments were all made to individuals in the subsidiary whose performance led to crushing losses and the near failure of AIG. Thus, last week, AIG made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees, forcing taxpayer bailout. Something is deeply wrong with this outcome. I hope the Committee will address it head on.

We have also now obtained the contracts under which AIG decided to make these payments. The contracts shockingly contain a provision that required most individuals’ bonuses to be 100% of their 2007 bonuses. Thus, in the Spring of last year, AIG chose to lock in bonuses for 2008 at 2007 levels despite obvious signs that 2008 performance would be disastrous in comparison to the year before. My Office has thus begun to closely examine the circumstances under which the plan was created.