Krugman, Taibbi, Johnston and Morgan nail Goldman; Commmenter nails Summers

Paul Krugman may not yet be awake to civic media as the only democratic remedy for America's economic (and soon to be political) crisis, but in today's column he does pillory Goldman Sachs as the driver of the financial oligarchy that has usurped control of American government and its elite universities as well. Comment after comment on Krugman's column is sharp; enough so perhaps to put some pressure on President Obama to recast his economic bailout program and change its leadership. References by commenters to GS critics like Matt Taibi, David Cay Johnston (audio clip from CBC Canada) and Mike Morgan are must reading. Morgan himself writes that

Sadly, what people don’t realize . . . is this time Goldman Sachs and other Banksters have raided our future, as they have control over many of our pensions, endowments and other fiduciary assets. Over the next few years, as people start to realize their pensions are gone, that is when the masses may finally rise up and crush Goldman Sachs and other greedy bastards that have destroyed so much. Unfortunately, it will be too late.

At Harvard in the 1960's, my professors would have dismissed language like this as "generating more heat than light." What would their counterparts at Harvard say about it today?

One comment to the Krugman column, #5 from Ruskin of Buffalo, NY, was recommended by more readers than any other - about 500 so far. It calls on President Obama to replace Larry Summers:

There are clearly MANY people in the Obama administration who have had a hand in the extraordinary betrayal of ordinary Americans represented by the policies formulated by Treasury Secretary Geithner, but the one person I would beg the President to get rid of is the second-in-command, Lawrence Henry Summers, head of the National Economic Council. I can think of nothing the President could do that would more clearly signal to the American people that he understands how angry tens of millions of us are, over the policies which have lavishly rewarded the banks at the expense of the taxpayers, than terminating Larry Summers's tenure in the Obama White House.

Why single out Summers? Because he is so obviously the big enchilada in the economic team; because his insensitivity to common sense behavior for someone in his position led to his "earning" millions and millions of dollars by giving talks [my link] to bankers and consulting for other players in financial services; because he was singularly unsuccessful in the most important job he ever took on (the presidency of Harvard) where his tin ear and lack of empathy left him isolated and rejected by the central faculty of the university. For God's Sake, Mr President, this MAN HAS HAD HIS TURN in the corridors of power - replace him with someone who has a heart as well as a brain, someone who has not lived his whole life surrounded by moneyed people, someone who CARES about the "little people" of this country (to reference Leona Helmsley.)

As a Harvard Alum, I can say that Ruskin says what I've been thinking for months. Summers really should go, and Ruskin's case for the man's quick departure is just plain eloquent. And David Olive at the Toronto Star says it's time for Summers to go, with Laura Tyson a a competent and ready-made "plug and play" replacement.

Wake Up, Paul Krugman!

In "Boiling the Frog," New York Times Nobel prize winning economist Paul Krugman today compares America to the proverbial frog that lacks the ability to hop out of a slowly heating pot. So what's making life hot for the American frog? Krugman says it's government gridlock on two critical issues: inaction on a second stimulus plan to prevent potentially crippling unemployment and inaction on climate change. This gridlock scares Mr. Krugman, who concludes:

So if we can’t get action to head off disaster now, what would it take? I don’t know the answer. And that’s why I keep thinking about boiling frogs.

Of course, many Americans vehemently disagree with the liberal Mr. Krugman on these vexed issues. Yet the solution to polarized disagreement and government gridlock obvious: it's a national decision-making process on these issues, available to all Americans. 

Geithner Releases Public/Private Investment Partnership, Dow Soars 497

Feels like springtime in Obamaland today! Markets worldwide responded favorably to the Tim Geithner's Public/Private Investment Partnership to restore solvency in America's too-big-to-fail banks. But will his plan, in its author's words, get "our financial system back to the business of providing credit to working families and viable businesses, and help prevent future crises?" Here's a running list of responses PRO, CON and NEUTRAL

John Authers asks an underlieing question about bank solvency (3/23)

Bill Gross buys in (3/23 CNBC video)

Paul Krugman all but despairs over the Geithner plan (3/23)

Clive Crook asks Krugman to think twice (3/23)

Tim Geithner argues that his plan is "part of an overall strategy to resolve the crisis as quickly and effectively as possible at least cost to the taxpayer. " (3/23)

Yves Smith, riffing off a WSJ editorial, talks about Fed rescue plan exit strategies (3/23)

Mike Whitney protests the Geithner plan's 5%/95% public/private investor ratio (3/23)

Felix Salmon warns that the plan is yet another "thing-that-has-to-go right in order . . . to work." (3/23)

Wall Street Journal says the plan "isn't the worst idea the federal government has ever had" (3/24)

"NYT "Opinionator" quotes from five mainstream media takes on the plan (3/24)

NYT "Room For Debate" compares responses to the Geithner plan of Krugman, Simon Johnson, Brad DeLong, Mark Thoma (3/24)

Mike Hudson takes a broad 3,000 year view to today's financial crisis in this 10 minute video (2/20). Here's his indispensable 2006 Harper's cover story, "The New Road to Serfdom: an Illustrated Guide to the Coming Real Estate Collapse"

New York Times voices doubts about the Geithner plan (3/24)

Joseph Stiglitz says the plan robs the taxpayer (3/24)

Martin Wolf says an adequate rescue plan is still far away (3/24)

Czech President of the European Union calls the plan "A way to hell". Also, Financial Times (3/25)

Rick Santelli of CNBC asks protests "two years" of government neglect of Nouriel Roubini's warnings about dangers of government exacerbation/funding of the credit bubble. (Go to 7:30 of this 10 minute February Durable Goods Report (Alt. link: http://www.cnbc.com/id/15840232?video=1072009974&play=1. s ) (3/25)

London Economist sits on the fence (3/25)

Nouriel Roubini, "Dr. Doom," sees POSITIVES in the plan! (3/25)

Lee Brodie, of CNBC's Fast Money crew, says Geithner may have rescued America (3/25)

New York Post reporter Mark DeCambre says Geithner plan lets City and B of A "buy back laundered loans at lower rates" (3/25)

Yves Smith, finance blogger, approves Willem Buiter of F.T. taking "Fed and Treasury to Task" (3/26)

Steve Waldman, finance writer, critique New Yorker finance writer James Surowiecki (scroll down to 3/25)

Investor's Business Daily, citing Friedrich Hayek, warns against government (bureaucrat) control of the economy (3/27)

Nouriel Roubini in this 20 min. Bloomberg TV interview says the plan "won't stop bank nationalizations" (3/28)

Newsweek article says Treasury Secretary Geithner is "hitting his stride" (3/28)

Newsweek Cover Story says the White House is ignoring Paul Krugman's criticisms of the Geithner plan (3/28)

Jeffrey Sachs, Yale economist, asks "Will Geithner and Summers Succeed in Raiding the FDIC and Fed?"

Mike Whitney, finance writer, citing DeCambre, Sachs and Stiglitz says "the country will undergo the greatest period of bank consolidation in its 230 year history."

New York Times charges Congress with "bipartisan resistance to a thorough investigation of what caused the collapse" (3/29)

Richard Posner, U.C. Law and jurist, says the Geithner plan "will simplify the banks' balance sheets by removing assets of uncertain value and replacing them with cash (3/29)

Gary Becker, U.C economist and Nobelist, says "it is a strange program indeed where banks get subsidized in proportion to how many 'bad' assets they hold." (3/31)

Joseph Stiglitz, Nobelist, says government overleveraging replicates the bank overleveraging that caused the meltdown.(4/1)

Jonathan Weil , Bloomberg, "Obama Stakes His Fortunes on Failed Banksters" (4/9)

Mike Whitney examines the recent report on the Geithner bank rescue plan released by the Congressional Oversight Committee chaired by Elizabeth Warren.(4/11)

Jeff Cox at CNBC.com says "Flood of US Debt Threatens To 'Crowd Out' Other Borrowers" (4/13)

Financial Times Tarp investigator seeks evidence of book fiddling (4/13)

Nouriel Roubini coming on strong for the first time in several weeks, says "Testing the Stress Test Scenarios: Actual Macro Data Are Already Worse than the More Adverse Scenario for 2009 in the Stress Tests. So the Stress Tests Fail the Basic Criterion of Reality Check Even Before They Are Concluded" (4/13)

Elizabeth Warren, Harvard Professor and Chair of the Congressional Oversight Committee, is interviewed by John Daley at Comedy Central (4/15)

Simon Johnson, MIT economist and former chief economist for the International Monetary Fund, argues in the Atlantic Monthly that "the financial industry has effectively captured our government" and that "recovery will fail unless we break the financial oligarchy that is blocking essential reform" (5/09)

Geithner Testimony arguing for bank stability sparks Wall Street rally (4/21).

Finance Models for Long and Short Term Futures

Let's get down to it (as Donnie Hathaway says at the beginning of "Everything is Everything"). Let NO ONE say we aren't looking for the best answers to the toughest questions! Though this post isn't much at the moment, it will as time permits expand to include interesting answers to these questions from all corners. Civic media, after all, is a problem-solving media. Iremove ideological barriers and partisan walls - left|center|right - by seating ALL parties at the same table - call it the table of What's Best for America.

But I myself have a bias that should be obvious to readers. I beg my readers to correct it.

I feel that some experts (Paul Krugman, Nouriel Roubini, Charles R. Morris, Steve Waldman, Mike Hudson, Paul Kasriel, Mike Whitney and Jim Willie) coming from the left wing were RIGHT and that other experts (Larry Kudlow, Larry Summers, Glenn Becker, Robert Rubin, Ben Bernanke and Hank Paulson) coming from center or center-right were WRONG in their assessments of the health of Amercan and global economies in recent years. And when it comes to resolving the crisis, it seems that the guys who were wrong are closer to Barack Obama at the moment than the guys who correctly predicted the global meltdown two, three or even four years ago.

So this post and this site needs input from center and right ring orientations. Specifically, who from these orientations saw the credit crisis coming?

OK, here we go. The crisis is being resolved in two phases, short and long term. We are now in the midst of a short term triage to stabilize the economy. This will lead to some kind of long term cure to restore American and global economies to maximum health.

But there's a danger: that of stabilizing the economy today in ways that ensure future repetitions of the credit crisis. Perhaps there's no alternative to such crises: perhaps financial bubbles are inherent to the so-called virtuous and vicious phases of the business cycle, as economist Hyman Minsky argued. And perhaps none exists on the spectrum of economic options that runs from total communistic/socialistic state command economies on the far left to pure unregulated free-market consumer capitalism on the far right.

Is it necessary, then, or even possible, for professional economists and central planners to think outside the box of this spectrum? It certainly won't be easy, for this spectrum seems to have contained all economic thought since the days of David Ricardo, Adam Smith, Karl Marx, Friedrich Hayek, Joseph Schumpeter, John Maynard Keynes, Milton Friedman and of course Hyman Minsky.

SHORT TERM Getting out of the mess we're in now (weathering the storm). Stabilizing American and global economies and financial systems within the next 12 to 24 months. Getting existing credit systems to work (assuming they can work) even as Paulson, Bernanke and central bankers worldwide take extreme and untested steps to do so.

• A Path to Economic Recovery Column by Charles R Morris
• What Should Be Done? Link to a 30 min. audio presentation by James K. Galbraith
• Bernanke's plan to clean up banks
  
• Martin Wolf critiques the Obama Recovery Plan (1/14)
  

LONG TERM Designing sustainable economic futures for the United States and the world of which it is now an integral part (mastering the weather). Some of the more astute predicters of the global credit bubble argue that modern consumer capitalism is cracked beyond repair, and that something new must be invented. It means developing the production, trade, currency and governance mechanisms adequate to ensuring the functionality of these new systems.

• Economist Dean Baker proposes a tax on financial transactions (Bob Herbert op ed)