The Stock Market Is Not The Economy
Useful reminder from Dean Baker: “The Washington Post told readers that ‘Stock Sell-Off Spurs Fears That Slump Will Worsen.’ Among whom did it raise such fears? Anyone who bases their expectations for the economy on the stock market has no idea what the economy will do. As should be apparent at this point, the stock market can often be driven by irrational exuberance. Remember, it was almost three times as high in 2009 dollars back in 2000 as it is today. Did that make sense? Obviously if it can be driven by irrational exuberance it can also be driven by irrational pessimism. There is no obvious reason to believe that the market has suddenly become a better judge of the economy’s prospects now than it had been in times past.”
FiveThirtyEight: “…the stock market is increasingly being used — often wrongly or disingenuously — as a proxy for the success or failure of the Obama administration.”
“It is premature to be making any assumptions about overall federal employment levels,” White House budget director Peter Orszag said. “We have no desire to bloat bureaucracy — indeed, just the opposite — and the budget will not do that.” But, he added, “in several key areas — from properly auditing contracts to providing quality medical care to veterans and reducing errors in Medicare and other programs — investing in skilled professionals will not only pay off over time but also immediately deliver better service to taxpayers.”…
…Officials at the Department of Veterans Affairs, for instance, said they expect to hire more than 17,000 new employees by the end of the year, many at hospitals and other facilities to fulfill Obama’s pledge to expand veterans’ access to health care. The agency — whose budget will grow by 11 percent, to $56 billion, under Obama’s plan — will add about 7,900 nurses, 3,300 doctors, 3,800 clerks and 2,400 practical nurses, spokeswoman Josephine Schuda said.
At the Social Security Administration, the budget will increase by 10 percent, to $11.6 billion, enabling the agency to hire new staff to handle backlogs on frontline operations, such as local field offices, hearing offices and teleservice centers, spokesman Mark Lassiter said.
Said Max Stier, president of the Partnership for Public Service: “This is obviously a new world. We’ve had a government that has been starved. . . . When you look at virtually every agency in government — whether it’s food inspectors at the Food and Drug Administration or claims examiners at the Social Security Administration — across the board, we’ve had all too few people doing the business of government.”…
…”What group of socialists got in the room and wrote this budget? Do they have any idea what the implications are?” asked Republican Newt Gingrich…
“I think that’s just a start,” [NYU Prof. Paul] Light said. “You kind of look across the federal landscape and you say there has to be more bodies with more expertise, as well as more bodies that can just deliver the basic services we’ve already promised.”
While Sen. John McCain goes ballistic about earmarks on the Senate floor, )abetted by W. Post Dana Milbank’s inaccurate description of several projects McCain targeted), while Sen. Minority Leader Mitch McConnell puts $75M worth of Kentucky earmarks in the FY09 appropriations bill.
Sebelius Formally Nominated for HHS
The Hill: “Despite concerns from social conservatives, Senate Republicans are not planning to mount a serious opposition to President Obama’s nomination of Kansas Gov. Kathleen Sebelius (D) to head the Department of Health and Human Services (HHS).”
TPMDC’s Matt Cooper previews: “One of the interesting things to watch in the coming weeks is how the White House woos Charles Grassley. Can they get the ranking Republican on the Finance Committee to be supportive of some of their principles. It would seem unlikely. But the presence of Bob Dole at this morning’s ceremony suggests a big push in that direction. It helps that Nancy Ann DeParle is also close with Jim Cooper, the Tennessee Democratic Congressman who is one of the House’s biggest budget hawks. (DeParle was the equivalent of HHS secretary in Tennessee. DeParle and Cooper are both Rhodes Scholars.) Cooper balked at the stimulus plan but he just might play ball on a health care package, say insiders.”
Angry Bear’s Robert Waldmann explains the insurance lobby’s strategy to undermine reform: “…health insurance companies are basically begging for the H Clinton health care plan. Now I’m old enough to remember that things looked good in February 1993, but it seems that Obama’s opposition to a mandate was (accidental ?) genius. The plan he proposed during the campaign is popular and would be so horrible for insurance companies that they are lobbying for universal coverage, that is, a mandate. Of course they don’t want to have to compete with Medicare and everyone seems to expect that eliminating that will be part of the deal. I mean when it comes right down to it, people are willing to sacrifice efficiency and let the public debt grow.”
Critics, including Democrats, lambasted Clinton and then-first lady Hillary Rodham Clinton for not adequately including Congress, interest groups and the public in their administration’s planning on healthcare. Clinton, these critics say, also waited too long to begin his push on reform, which started in the latter part of his first year in office.
Obama is trying to show he’s learned from those mistakes, and the summit is a part of that effort.
“The summit is an excellent way to really start this process in a participatory manner,” said Ron Pollack, executive director of the liberal healthcare advocacy group Families USA. “It’s obviously not the be-all and end-all,” however, he stressed. “It’s not the place where the important decisions will be made.”
Mortgage Bill Negotiations Continue
The House this week will try again to pass legislation containing a controversial provision that would allow bankruptcy judges to modify mortgages to keep borrowers in their homes. But negotiations between the House and Senate taking place Monday evening signaled changes on the contents of the bill, sources familiar with the matter said.
Speaker Nancy Pelosi, D-Calif., and House Judiciary Chairman John Conyers Jr., D-Mich., both said last week that they expected the bill (HR 1106) to come to the floor “as is,” indicating any major substantive changes to the legislation would probably occur in the Senate.
Though Pelosi appeared to quell a revolt by the centrist New Democrat Coalition late last week, negotiations are an effort by leadership to present a more politically acceptable bill to conservative members of the caucus that remain wary of the idea. The group, led by Ellen O. Tauscher, D-Calif., had indicated that it would support the legislation, which also includes several other housing and financial provisions, when it hits the floor, possibly as early as Wednesday, but likely a day later. The timing, however, remains in flux because of Monday’s snowstorm, which delayed a caucus Democrats had planned on the issue.
For its part, the home lending industry is prepared to concede the eventual enactment of the legislation, which would allow a bankruptcy judge to cut the principal on a homeowner’s mortgage, lower the interest rate and extend the terms. The process is sometimes referred to as a “cramdown.”
Huffington Post’s Jane Hamsher: “I’ve talked to probably a dozen people involved with the bill allowing bankruptcy judges to write-down mortgages, which would reduce foreclosures by 20% and wouldn’t cost the taxpayers one dime. Every single person I spoke to said the same thing — it’s disgusting that banks are writing the legislation, watering it down so it is meaningless with the help of Ellen Tauscher and the New Democrat coalition … How can Tauscher claim that there’s anything ‘moderate’ about working on behalf of the bankers who created this crisis?”
Americans for Fairness in Lending offers web-based tool to call your Congressperson.
The Power of Stimulus
USA Today on cities swtiching to energy-efficient LED streetlights: “Several cities, including Ann Arbor, Mich., and Anchorage, have installed LED streetlights, and dozens more are planning conversions. At least 30 cities have asked for more than $104 million in federal stimulus funds to help them make the change.”
Rachel Maddow reports that the Republic Windows & Doors factory that closed in Chicago in Dec. will be re-opened by a green technology firm, saving union jobs, thanks in part to the stimulus.
Stimulus will help laid-off workers with COBRA costs,” says USA Today’s Sandra Block.
Last week, Pelosi’s office sent orders to freshman and second-term members to cull success stories from their districts about how the money is being used.
They quickly had 10 ready-made anecdotes, from the reconstruction of a bridge that will save a small family business in the district of Rep. Bruce Braley (D-Iowa) to a headline about teachers’ jobs being saved in the district of Rep. Joe Courtney (D-Conn.).
The idea is to keep members and their staffs on the lookout for ways to remind their constituents that the money spent in the stimulus is coming back to their districts…
…Democratic leaders know that the stimulus has gotten mixed up with the publicly loathed $700 billion Wall Street bailout and general criticism of government spending. Some on Capitol Hill note that it is inevitable that some funds in the stimulus measure will be misused. That is why the Obama administration and Democratic leaders in Congress have given extra funds to watchdog government agencies to scrutinize how the stimulus is spent.
And the good publicity could be long in coming if Democrats don’t put effort into it. It takes time to get money into the pipeline, and even longer to get guys out in hardhats. “Everybody’s watching for the government to fail,” said a Democratic aide.
NYT: “By easing the terms of its $150 billion rescue package for the American International Group, the government is trying to buy time for the financial conglomerate to slim down and reinvent itself as a simple property and casualty insurer, with a new name, new faces in the boardroom and perhaps an initial public offering in its future.”
Analysis from NYT’s Andrew Sorkin: “Of course, there seems to be a slight disconnect: at one moment Mr. Geithner appears to be toeing a populist line when it comes to executive pay and corporate aircraft, and at another, he is generous about spending tax dollars without an immediate return. The good news is that he’s taking a more long-term, holistic approach — and he’s setting up A.I.G. for a much-needed breakup down the road. (The deal calls for two units of A.I.G. — American International Assurance and the American Life Insurance Company — to be owned directly by taxpayers.) The bad news is that he had every right to press to own 100 percent of A.I.G., and he didn’t take it.
Joe Paduda reacts: “Operations could continue, policyholders would be protected, and a big chunk of money given back to the taxpayers.”
Talking Points Memo asks: “just who’s getting the money the federal government keeps forking over to AIG?”
CS Monitor on why AIG really is too big to fail: “‘AIG by itself is not important, but it is intertwined in so many other aspects of our financial life and so many people rely on it in one form or another,’ says Stan Collender, a partner at Qorvis Communications in Washington. ‘If AIG were allowed to go down, it could lead to possibly a global depression.’”
ProPublica on banks returning bailout money: “It’s becoming a trend. Last week, Louisiana’s IberiaBank filed notice with the Treasury Department that it would be returning the government’s $90 million investment. Today, Minnesota’s TCF Financial followed suit, announcing that it would be returning the government’s $361 million investment.”
Permanent Takeover of Fannie and Freddie?
NYT speculates that federal government will maintain control of Fannie Mae and Freddie Mac, and slants piece with unsourced statements such as, “lawmakers of all stripes are quietly voicing worries that government involvement in the mortgage industry could lead to the very problems that caused the current crisis.”
But quotes Rep. Barney Frank: “There is a commitment to restructure these companies, and we are going to want to retain a hand in the things that matter, like affordable housing and making sure that the housing economy doesn’t become a threat to the entire economy again. Some of what these companies did will be returned to the private sector, and some of it is going to remain with a public entity.”
[NYT] raises the specter that the mortgage giants may never return to private form. Frankly, we think that is not entirely a bad thing. Fannie and Freddie were originally agencies of the US government and were (sort of) spun out in the late 1960s, when their borrowings on top of Vietnam war funding made the Federal balance sheet look ugly…
…Freddie and Fannie are very different cases than the big banks. They were never truly private; that was a big part of the reason they were put into conservatorship. They came to depend on both very high levels of leverage (that is, they held paltry amounts of equity) AND funding at virtually the same rate as the US government. Even then, both Fannie and Freddie engaged in accounting fraud to burnish their numbers and justify more handsome pay to top brass. In other words, this was a business model that barely worked even in the good days.
Washington Independent: “…there’s another outrage that Washington seems to be missing: The growing number of bank-owned properties in foreclosure scarring neighborhoods across the country. The volume of bank-owned foreclosed homes – known as REOs, or real-estate owned properties – is growing at an alarming rate, compounding the foreclosure crisis by sticking hard-hit neighborhoods with vacant and often trashed homes that drive down property values even more … The issue goes beyond just TARP money. Bank REO behavior also spotlights what kind of regulations are needed for the financial system…”
Conflicting EFCA Signals
On Monday, March 9th Congressman George Miller and Senator Ted Kennedy are expected to introduce the Employee Free Choice Act into the House of Representatives.
While no official word has been released yet inside sources attending the AFL-CIO Executive Council Meeting in Miami with Labor Secretary Solis and Vice President Biden have assured me the introduction of the Employee Free Choice Act next Monday is a great possibility.
The reason for the early release is to preempt the continued lies by Opposition Groups like The Coalition for a Democratic Workplace, their public relation firm Navigators Global and Republican Senators.
The other reason is because both labor, Congressman George Miller and Senator Ted Kennedy believe we have the 60 votes needed to get it passed in the Senate.
The Plum Line: “A White House official confirms that Biden will be addressing the AFL-CIO’s big meeting in Miami on Thursday, and labor officials expect him to detail the administration’s strategy for passing the Employee Free Choice Act, a measure to make it easier to unionize that is labor’s top priority. Labor officials will be hoping to hear a sign from Biden that the administration is fully committed to Employee Free Choice and is preparing to act on it this year.”
Huffington Post’s Sam Stein: “Worry Grows Over Dem Defections On EFCA”
OpenLeft’s David Sirota proposes confrontational strategy: “The labor movement, therefore, could make a very simple proposal to the Senate Majority Leader: Reid can either A) Schedule the votes for EFCA, during the crucial cloture vote to stop a filibuster get every Democratic senator to vote for cloture, and then get 51 Democrats to vote for it on final passage or B) Not do A, and therefore end his political career knowing that organized labor will put $2 or $3 million into an independent third-party progressive candidate against him in the general election.”
MyDD’s Todd Beeton laments that Colorado’s senators are wavering.
Digby on timing: “The Republicans are always going to stage a hissy fit on this, no matter what, so there’s no point in trying to find ‘the right time.’ They have signaled that they have no intention of cooperating on any legislation that doesn’t only benefit rich people it’s useless trying to bargain either. In for a penny and all that rot. Might as well do it while the doing is possible.”
Hold Fast on weak start for corporate-funded anti-EFCA petition: “…the Anuzis/Gingrich petition is at 598 people. CPAC and its thousands of participants had gone on for two days in the interim, there was major blog and news coverage of the Anuzis/Gingrich new media effort against Free Choice, and yet this massive new media campaign can’t scrape together 600 dead enders to stand with Newt and Saul against America’s workers. Maybe Newt and Saul need to up the ante and pony up for an XBox 360 or throw in a year’s supply of Cheetos and Mountain Dew Code Red?”
Republic Windows & Doors factory workers visit Detroit to promote EFCA.
Grist’s Bill McKibben exults at the “Largest anti-coal action yet in the United States: Thousands and thousands of people flooding the streets around the Capitol Hill power plant.”
“Obama Plan Aims to Streamline College Loan Shopping,” save $4B and put the scandal-marred private student loan companies out of their misery, according to CNN/Money.com.
Republicans are threatening to filibuster judicial appointments, according to Politico.
Terrance Heath contributed to the making of this Breakfast.