Citigroup bailout: weak, arbitrary, incomprehensible
The government (should have) had two goals for this bailout. First, since everyone assumes Citi is too big to fail, the bailout had to be big enough that it would settle the matter once and for all. Second, it had to define a standard set of terms that other banks could rely on and, more importantly, the market could rely on being there for other banks. This plan fails on both counts.
The arithmetic on this deal doesn’t seem to work for me (feel free to help me out). Citi has over $2 trillion in assets and several hundred billions of dollars in off-balance sheet liabilities. $27 billion is a drop in the bucket. Friedman Billings Ramsey last week estimated that Citi needed $160 billion in new capital. (I’m not sure I agree with the exact number, but that’s the ballpark.) Yes, there is a guarantee on $306 billion in assets (which will not get triggered until that $27 billion is wiped out), but that leaves another $2 trillion in other assets, many of which are not looking particularly healthy. If I’m an investor, I’m thinking that Citi is going to have to come back again for more money.
In addition, the plan is arbitrary and cannot possibly set an expectation for future deals. In particular, by saying that the government will back some of Citi’s assets but not others, it doesn’t even establish a principle that can be followed in future bailouts. In effect, the message to the market was and has been: “We will protect some (unnamed) large banks from failing, but we won’t tell you how and we’ll decide at the last minute.)” As long as that’s the message, investors will continue to worry about all U.S. banks. [continued…]
As progressives, we can view President-Elect Obama’s emerging economic team in one of two ways. Either he has disappointed us by picking a group of Clinton retreads–the very people who brought us the deregulation that produced the financial collapse; the fiscal conservatives who in the 1990s put budget balance ahead of rebuilding public institutions. Or we can conclude that he has very shrewdly named a team of technically competent centrists so that he can govern as a progressive in pragmatist’s clothing–as he moves the political center to the left.
Which will it be? Certainly, Obama’s press notices are phenomenal, and Republicans have almost been more enthusiastic than Democrats. When Arianna Huffington and I debated George Will and David Brooks on George Stephanopulos’s This Week Sunday morning, the conservatives were, if anything, more approving of Obama’s picks than we were.
On another channel, Republican guru Ed Rollins could be heard exulting about the Obama cabinet. I even had the out-of-body experience of debating Pat Buchanan on Hardball, to find that he thought Hillary Clinton was a terrific choice for Secretary of State. Obama now has the highest approval ratings on record for any president-elect, and he has the entire Republican pundit class in a swoon. [continued…]
It is testament to former Treasury Secretary Robert E. Rubin’s star power among many Democrats that as President-elect Barack Obama fills out his economic team, a virtual Rubin constellation is taking shape.
The president-elect’s choices for his top economic advisers — Timothy F. Geithner as Treasury secretary, Lawrence H. Summers as senior White House economics adviser and Peter R. Orszag as budget director — are past protégés of Mr. Rubin, who held two of those jobs under President Bill Clinton. Even the headhunters for Mr. Obama have Rubin ties: Michael Froman, Mr. Rubin’s chief of staff in the Treasury Department who followed him to Citigroup, and James P. Rubin, Mr. Rubin’s son.
All three advisers — whom Mr. Obama will officially name on Monday and Tuesday — have been followers of the economic formula that came to be called Rubinomics: balanced budgets, free trade and financial deregulation, a combination that was credited with fueling the prosperity of the 1990s.
But times have changed since then. On Wall Street, Mr. Rubin is facing questions about his role as director of Citigroup given the bank’s current woes. And in Washington, he and his acolytes are calling for a new formulation to address the global economic crisis that Mr. Obama will inherit — and rejecting or setting aside, for now, some of their old orthodoxies. [continued…]
Scowcroft protégés on Obama’s radar
Many of the Republicans emerging as potential members of the Obama administration have professional and ideological ties to Brent Scowcroft, a former national-security adviser turned public critic of the Bush White House.
Mr. Scowcroft spoke by phone with President-elect Barack Obama last week, the latest in a months-long series of conversations between the two men about defense and foreign-policy issues, according to people familiar with the discussions.
The relationship between the president-elect and the Republican heavyweight suggests that Mr. Scowcroft’s views, which place a premium on an Israeli-Palestinian peace accord, might hold sway in the Obama White House.
Defense Secretary Robert Gates, who was deputy national-security adviser under Mr. Scowcroft in the George H.W. Bush administration, is almost certain to be retained by Mr. Obama, according to aides to the president-elect. Richard Haass, a Scowcroft protégé and former State Department official, could be tapped for a senior National Security Council, State Department or intelligence position. Mr. Haass currently runs the Council on Foreign Relations. [continued…]
Israeli hawks ready to fly on Iran
Prepare for war. Last week I met the Boogie Man, the former head of the Israeli Defence Forces, General Moshe “Boogie” Ya’alon, who is preparing the political groundwork for a military attack on Iran’s key nuclear facilities. “We have to confront the Iranian revolution immediately,” he told me. “There is no way to stabilise the Middle East today without defeating the Iranian regime. The Iranian nuclear program must be stopped.”
Defeating the theocratic regime in Tehran could be economic or political or, as a last resort, military, he said. “All tools, all options, should be considered.” He was speaking in the tranquillity of the Shalem Centre in Jerusalem, where he was, until last Thursday, one of Israel’s plethora of warrior-scholars, though more influential than most.
Could “all options” include decapitating the Iranian leadership by military strikes, including on President Mahmoud Ahmadinejad, who has called for Israel’s destruction? “We have to consider killing him,” Ya’alon replied. “All options must be considered.” [continued…]
An Israeli-Palestinian agreement: Forget about it
I‘ve been a Palestinian firster for most of my professional life. I believe that the Palestinian issue is the core of the Arab-Israeli conflict, the key to regional peace, and the sine qua non for preserving Israel as a Jewish democratic state.
These arguments remain valid. What’s changed is that a conflict-ending agreement between Israelis and Palestinians may no longer be possible. I choose my words carefully here. Varying kinds of accommodations cease fires, informal cooperation and temporary arrangements may still be possible. But an agreement now or perhaps for the foreseeable future that revolves conclusively the four core issues (borders, Jerusalem, refugees and security) isn’t.
Three realities drive my pessimism and should force experts, politicians and would be mediators to keep their enthusiasm for quick or easy solutions under control. [continued…]
Lawrence Wilkerson’s lessons of war and truth
Nations in flux are nations in need. A new president will soon take office, facing hard choices not only about two long-running wars and an ever-deepening economic crisis, but about a government that has long been morally adrift. Torture-as-policy, kidnappings, ghost prisons, domestic surveillance, creeping militarism, illegal war-making, and official lies have been the order of the day. Moments like this call for truth-tellers. For Truth and Reconciliation Commissions. For witnesses willing to come forward. For brave souls ready to expose hidden and forbidden realities to the light of day.
Lawrence B. Wilkerson is such a man. He came to national prominence in October 2005 when — having left his post as chief of staff to Secretary of State Colin Powell earlier in the year — he laid bare some of the secrets of the Bush White House as he had experienced them. He had been inside the halls of power as the invasion and occupation of Iraq took shape. In Bush’s second term, on the outside, he found that he had had enough. The American people, he thought, had a right to know just how their government was really working, and so he offered them this vision of the Bush administration in action: “[S]ome of the most important decisions about U.S. national security — including vital decisions about postwar Iraq — were made by a secretive, little-known cabal. It was made up of a very small group of people led by Vice President Dick Cheney and Defense Secretary Donald Rumsfeld.”
In the years since, Wilkerson, a retired Army colonel, has not been reticent, especially when it came to “the militarization of America’s foreign policy” and the practice of extraordinary rendition (the kidnapping of terror suspects and their deliverance into the hands of regimes ready and willing to torture them). [continued…]
Five steps to a nuclear-free world
Weapons of mass destruction and disarmament form one of the gravest challenges facing the world. One of my priorities as United Nations secretary general is to promote global public goods and remedies to challenges that do not respect borders. A world free of nuclear weapons is a global public good of the highest order.
My interest in this subject stems partly from personal experience. My homeland, South Korea, has suffered the ravages of conventional war and faced threats from nuclear weapons and other WMD. But, of course, such threats are not unique to Asia.
Despite a longstanding taboo against using nuclear weapons, disarmament remains only an aspiration. So, is a taboo alone on the use of such weapons sufficient? [continued…]
For many Americans, the idea of a world without nuclear weapons is a bit like the idea of a world without war or disease – it would be nice, but, contra John Lennon, it’s hard to imagine.
That’s not to say lots of people haven’t devoted themselves to the cause. As the atomic age was dawning, Gandhi was already demanding its end, and today Pope Benedict XVI echoes that call. A host of international organizations, from Greenpeace to Mayors for Peace to the Campaign for Nuclear Disarmament to the German Green Party, are dedicated to the abolition of nuclear weapons. Many of them have been at it for decades.
The movement, however, has always carried utopian associations, and been conflated in the popular imagination with pacifism. The leaders of the world’s nuclear powers, their global stature buttressed by their atomic arsenals, have, with a few exceptions, shown little real interest in the idea.
This is changing. Total nuclear disarmament – “getting to zero” in the arms-control argot – has become a mainstream cause. Voices from the heights of the American foreign policy establishment have begun to argue that, in a world of inevitably unruly globalization, increasing interest in nuclear energy, incomplete alliances, ambitious suicide terrorists, and ever-present human fallibility, it will never be enough to improve controls on the world’s nuclear weapons, or to reduce their numbers. We have to commit to eliminating them altogether.
These arguments are being made not by popes and mahatmas and Greens but by former secretaries of state and secretaries of defense, by generals and nuclear scientists, Democrats and Republicans. The leaders of the new no-nuke movement are George Shultz, Henry Kissinger, William Perry, and Sam Nunn, four of the most respected figures in American foreign policy circles. Over the past two years, they have, in speeches, at arms-control conferences and, most prominently, in two widely circulated op-ed pieces, lent their authority to an idea that is still seen as fairly radical. [continued…]
