In putting several trillion dollars in government funds on the line, the country has now done just about everything that Wall Street could have asked to address the financial crisis. The question now, as John Kennedy might have put it, is what Wall Street is ready to do for its country. So far, the answer is not much.
After getting their closed-door briefing yesterday from Paulson on the government’s latest initiatives, Wall Street’s finest literally ran from the Treasury to their waiting limousines, bypassing a media scrum eager to convey any scrap of wisdom or insight.
Court reporters will tell you they can always tell the innocent from the guilty on these kinds of perp walks, and the Wall Street crowd yesterday looked particularly guilty, unable even to conjure up a soothing word to a nation fretting over its shrunken 401(k)s, or a simple thank you to taxpayers for having saved their bacon. Their silence and invisibility throughout this crisis attests to the moral and political bankruptcy of a financial elite that is the perfect match for the financial bankruptcy they have now visited upon their investors, their creditors and their customers.
After yesterday’s “historic” meeting, we are told by industry apologists that we are supposed to be grateful to nine leading banks for having “volunteered” to accept additional capital from the Treasury, along with a government guarantee for newly issued bank debt, even if it means having to accept a dilution of existing shares and a few harmless restrictions on their operations.
Pardon me if I’m less than blown over by this munificent offer, but it hardly seems commensurate either with the severity of the current crisis or the depth of the banks’ culpability in fomenting it. [continued…]
The decision to devote some of the $700 billion financial rescue for direct cash infusions into banks has reopened the rift over whether financial institutions that get federal help should abide by executive pay limits.
Treasury officials have argued privately that banks aided this way should be exempt from the toughest executive pay restrictions in the rescue legislation passed by Congress.
Some lawmakers disagree.
“Restrictions on executive compensation will ensure that taxpayer money is not wasted enriching the same people whose poor decision-making created this crisis,” Sen. Charles E. Schumer (D-N.Y.) wrote to Treasury Secretary Henry M. Paulson Jr. yesterday. “It is imperative that these restrictions, including limitations on the incentives for executives to take excessive risks and the elimination of golden parachutes, should apply to any capital injection program.” [continued…]
Since the creation of the Bretton Woods monetary system in 1944 every global financial initiative of any significance has been devised, led and co-ordinated by the US Government. This US leadership did not mean that America always got its way in financial affairs — nor that US co-ordination always succeeded, as exemplified by the breakdown of Bretton Woods in 1971. But it did mean that international financial initiatives were never attempted until ideas and the leadership came from Washington. The sole exception to this rule in the past 30 years was the creation of the euro; but this was viewed in Washington as an intra-European affair with limited global consequences.
The present global banking crisis has been a very different matter, since it originates in the US itself. Even a few weeks ago a solution without US leadership would have been inconceivable. In the past few days, however, the failure of the Bush Administration to follow through in any concrete way on the $700 billion “Paulson package” that it rammed so painfully through the Congress, has focused attention on Washington’s vacuum of leadership and ideas. Aghast at the dithering incompetence of the US in handling this crisis, European politicians have realised that Henry Paulson, the supposedly brilliant US Treasury Secretary, was an emperor with no clothes. Instead of waiting for US leadership, they had to take responsibility for Europe’s problems. In trying to do this, they have found an unlikely intellectual guide and champion: the British Treasury and Gordon Brown. [continued…]
If Monday’s market rally really does signal a turning point in the global financial crisis, the world will hail an improbable saviour. Step forward Gordon Brown, Britain’s gloomy prime minister.
Until the crisis struck, the conventional wisdom was that Mr Brown was a tragic-comic figure: a man who had desperately wanted to be prime minister, but had proved hopelessly unfitted to the task.
But the Brown bail-out plan has been seized upon, not just in Britain – but around the world. Last Friday Paul Krugman, the new Nobel laureate for economics, praised the British government for “showing the kind of clear thinking that has been all too scarce in America”. He wrote: “The United States and Europe should just say: ‘Yes, prime minister.’ The British plan isn’t perfect, but … it offers by far the best available template for a broader rescue effort.”
And so it came to pass. The emergency European summit in Paris over the weekend saw the 15 members of the European single currency area adopt bank rescue plans that look strikingly like the British initiative. British officials, who have often been told that in a big economic crisis they would be tugged along hopelessly in the wake of the eurozone, are enjoying their moment of vindication.
Crises define politicians. The contrasting fortunes of Mr Brown and President George W. Bush illustrate the point. In normal times, Mr Brown often seems indecisive, gloomy and robotic. In normal times, Mr Bush seems chipper, decisive and a regular guy. But, in a crisis, both men’s manners are transformed – one for the better and one for the worse. Mr Brown suddenly looks calm, determined and in control. Mr Bush has an unfortunate tendency to look panicky and out of his depth.
The current financial crisis seems to have actually cheered Mr Brown up. When a mobile phone rang during a speech he was giving late last week, the prime minister made a rare spontaneous joke, speculating about whether this was news of yet another collapsing bank. This kind of joke sounds like the height of bad taste. But somehow it worked. Gallows humour becomes Mr Brown. And besides, his audience had some confidence that he had a handle on the situation.
Mr Bush’s presidency may also be defined by his reaction to crises – but in a bad way. In the immediate aftermath of the terrorist attacks on New York and Washington, he disappeared, albeit on secret service advice. He later recovered and gave some fine speeches. But Mr Bush’s hopelessly out-of-touch performance during hurricane Katrina cemented his reputation for incompetence. “Brownie, you’re doing a heck of a job” – the remark he directed to the hapless head of the federal government’s disaster relief effort – looked like it might be the defining remark of his time in office.
But it now has a close competitor. The president’s reported comment that “this sucker could go down” was the only memorable thing he has said throughout the entire financial crisis. Unfortunately, it made him sound like a Texan on the bridge of the Titanic. Compare and contrast with Roosevelt’s: “The only thing we have to fear is fear itself.” [continued…]
This is nothing. Well, nothing by comparison to what’s coming. The financial crisis for which we must now pay so heavily prefigures the real collapse, when humanity bumps against its ecological limits.
As we goggle at the fluttering financial figures, a different set of numbers passes us by. On Friday, Pavan Sukhdev, the Deutsche Bank economist leading a European study on ecosystems, reported that we are losing natural capital worth between $2 trillion and $5 trillion every year as a result of deforestation alone. The losses incurred so far by the financial sector amount to between $1 trillion and $1.5 trillion. Sukhdev arrived at his figure by estimating the value of the services – such as locking up carbon and providing fresh water – that forests perform, and calculating the cost of either replacing them or living without them. The credit crunch is petty when compared to the nature crunch.
The two crises have the same cause. In both cases, those who exploit the resource have demanded impossible rates of return and invoked debts that can never be repaid. In both cases we denied the likely consequences. I used to believe that collective denial was peculiar to climate change. Now I know that it’s the first response to every impending dislocation. [continued…]
John McCain’s campaign is pretty much a shambles right now.
If you don’t believe me, just listen to John McCain. His chief goal these days is calming down his crowds, not firing them up.
And that is an honorable thing to do. It may not be a winning thing to do. But it is honorable.
Sarah Palin, once seen as a huge plus to the ticket, is now increasingly emerging as a liability.
Forget that an independent legislative panel found Friday that she had abused her power and violated ethics laws as governor of Alaska. Forget that with the possibility of Palin being a heartbeat away from the presidency, McCain gives up the argument that his ticket represents experience and a steady hand on the tiller.
The real problem for McCain is that Palin is running a separate — and scary — campaign that does not seem to be under anybody’s control. [continued…]
Are we witnessing the reemergence of the far right as a power in American politics? Has John McCain, inadvertently perhaps, become the midwife of a new movement built around fear, xenophobia, racism and anger?
McCain has clearly become uneasy with some of the forces that have gathered around him. He has begun to insist, against the sometimes loud protests from his crowds, that Barack Obama is, among things, a “decent person.”
Yet McCain’s own campaign is playing with powerful extremist themes to denigrate Obama. When his running mate, Sarah Palin, first brought up Obama’s association with 1960s radical Bill Ayers, who has become a centerpiece of McCain’s attacks, she accused Obama of “palling around with terrorists.” What other “terrorists” was she thinking about?
Since Obama was a child when Ayers was part of the Weather Underground, and since even Republicans have served on boards with Ayers, this is classic guilt by association.
Ayers has been dragged into this campaign because there is a deep frustration on the right with Obama’s enthusiasm for shutting down the culture wars of the 1960s. [continued…]
Sarah Palin’s reaction to the Legislature’s Troopergate report is an embarrassment to Alaskans and the nation.
She claims the report “vindicates” her. She said that the investigation found “no unlawful or unethical activity on my part.”
Her response is either astoundingly ignorant or downright Orwellian.
Page 8, Finding Number One of the report says: “I find that Governor Sarah Palin abused her power by violating Alaska Statute 39.52.110(a) of the Alaska Executive Branch Ethics Act.”
In plain English, she did something “unlawful.” She broke the state ethics law.
Perhaps Gov. Palin has been too busy to actually read the Troopergate report. Perhaps she is relying on briefings from McCain campaign spinmeisters.
That’s the charitable interpretation.
Because if she had actually read it, she couldn’t claim “vindication” with a straight face. [continued…]
In the rhetoric of many American politicians and commentators, the Islamic Republic of Iran is portrayed as an immature, ideologically driven regime that does not think of its foreign policy in terms of national interests. Apocalyptic scenarios have been advanced about a millennially inclined Iranian leadership using nuclear weapons against Israeli targets, with no regard for the consequences, effectively suggesting that the Islamic Republic aspires to become history’s first “suicide nation.”
Even in less extreme foreign policy circles, the debate about America’s Iran policy is reminiscent of a debate over how to discipline badly behaved children. On one side, a hard-line “spare the rod and spoil the child” school argues that this immature polity must be coerced into more appropriate behavior. On the other side, a pro-engagement “build a problem child’s self-esteem” camp argues that it is more productive to cajole Iran into better behavior through various material inducements.
This type of discussion is profoundly flawed, for it overlooks an important new reality: Iran’s growing strategic importance and confidence in its role in the region mean it is no longer just a threat to be managed. More than ever, it is now an international actor that can profoundly undermine, or help advance, many of the United States’s most vital strategic objectives.
That is why the next U.S. president, whether it is John McCain or Barack Obama, should reorient American policy toward Iran as fundamentally as President Nixon reoriented American policy toward the People’s Republic of China in the early 1970s. Nearly three decades of U.S. policy toward Iran emphasizing diplomatic isolation, escalating economic pressure, and thinly veiled support for regime change have damaged the interests of the United States and its allies in the Middle East. U.S.-Iranian tensions have been a constant source of regional instability and are increasingly dangerous for global energy security. Our dysfunctional Iran policy, among other foreign policy blunders, has placed the American position in the region under greater strain than at any point since the end of the Cold War. It is clearly time for a fundamental change of course in the U.S. approach to the Islamic Republic. [continued…]
The biggest ever sale of oil assets will take place today, when the Iraqi government puts 40bn barrels of recoverable reserves up for offer in London.
BP, Shell and ExxonMobil are all expected to attend a meeting at the Park Lane Hotel in Mayfair with the Iraqi oil minister, Hussein al-Shahristani.
Access is being given to eight fields, representing about 40% of the Middle Eastern nation’s reserves, at a time when the country remains under occupation by US and British forces.
Two smaller agreements have already been signed with Shell and the China National Petroleum Corporation, but today’s sale will ignite arguments over whether the overthrow of Saddam Hussein was a “war for oil” that is now to be consummated by western multinationals seizing control of strategic Iraqi reserves. [continued…]
Take a restive, nuclear-armed nation with an untested new government, an escalating Islamic insurgency, long-standing tensions with its neighbors and an economy in free fall for months.
Then add in a global financial crisis. Some analysts and diplomats fear Pakistan could come to exemplify a perilous new phenomenon: a strategic but unstable state at risk of being pushed to the breaking point by external economic factors.
Government officials insist that Pakistan’s economic fundamentals, while weakened, are holding steady. But this politically volatile country of 165 million people, a crucial U.S. ally in the fight against the Taliban and Al Qaeda, can ill afford more upheaval.
Pakistan’s creditworthiness rating is the second worst among nations ranked by Standard & Poor’s, superior only to that of the Seychelles. Last week, the country’s new president, Asif Ali Zardari, felt compelled to offer assurances that “Pakistan is not going bankrupt.”
On Monday, armed police surrounded the Karachi stock exchange to prevent a recurrence of the stone-throwing rioting by investors that occurred in July. [continued…]