Matt Taibbi says we should run Elizabeth Warren for president in 2012, and the more I read about how the since-appointed members of the Obama administration handled the financial crisis, the more I like the idea:

Oct. 27 (Bloomberg) -- In the months leading up to the September 2008 collapse of giant insurer American International Group Inc., Elias Habayeb and his colleagues worked nights and weekends negotiating with banks that had bought $62 billion of credit-default swaps from AIG, according to a person who has worked with Habayeb.

Habayeb, 37, was chief financial officer for the AIG division that oversaw AIG Financial Products, the unit that had sold the swaps to the banks. One of his goals was to persuade the banks to accept discounts of as much as 40 cents on the dollar, according to people familiar with the matter.

[...] Beginning late in the week of Nov. 3, the New York Fed, led by President Timothy Geithner, took over negotiations with the banks from AIG, together with the Treasury Department and Chairman Ben S. Bernanke’s Federal Reserve. Geithner’s team circulated a draft term sheet outlining how the New York Fed wanted to deal with the swaps -- insurance-like contracts that backed soured collateralized-debt obligations.

CDOs are bundles of debt including subprime mortgages and corporate loans sold to investors by banks.

Part of a sentence in the document was crossed out. It contained a blank space that was intended to show the amount of the haircut the banks would take, according to people who saw the term sheet. After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar. The content of its deliberations has never been made public.

The New York Fed’s decision to pay the banks in full cost AIG -- and thus American taxpayers -- at least $13 billion. That’s 40 percent of the $32.5 billion AIG paid to retire the swaps. Under the agreement, the government and its taxpayers became owners of the dubious CDOs, whose face value was $62 billion and for which AIG paid the market price of $29.6 billion. The CDOs were shunted into a Fed-run entity called Maiden Lane III.

[...] A spokeswoman for Geithner, now secretary of the Treasury Department, declined to comment. Jack Gutt, a spokesman for the New York Fed, also had no comment.

One reason par was paid was because some counterparties insisted on being paid in full and the New York Fed did not want to negotiate separate deals, says a person close to the transaction. “Some of those banks needed 100 cents on the dollar or they risked failure,” Vickrey says.

In other words, Geithner used taxpayer money from one big disaster to paper over the fact that all the other parties were bankrupt, too - and probably still are, no matter what you read in the papers. Wait until the commercial market crashes. Wheee!

Who could have guessed? Apparently all those people losing their homes are helping the economy recover faster than expected. So let's look on the bright side of all those homeless, helpless families:

The pain of millions of people across America losing their homes hardly inspires confidence in the future. But in a brutal way, it could be restoring the financial health of the U.S. consumer faster than many recognize.

One of the biggest clouds on the economic horizon is the vast amount of debt U.S. households took on during the boom years. The Federal Reserve puts total household debt, including mortgage debt, at about $13.7 trillion, or 125% of annual after-tax income, a burden that many economists believe will take several years to pare down to what they see as a more sustainable level of 100%. During that "deleveraging" process, the logic goes, U.S. consumers -- whose spending makes up more than two-thirds of the U.S. economy and about one-fifth of the global economy -- won't be able to play a leading role in any recovery.

The gloomy forecasts, though, miss an important point: Debts have value only to the extent that they are being paid, and a rapidly rising number of U.S. households aren't doing so. Those defaults are leading to losses at banks, a wave of foreclosures, trouble for neighborhoods and strife for families. But they are also providing an immediate, albeit radical, form of debt relief.

"It's not ideal, because it carries other costs," said Karen Dynan, a consumer-finance specialist at the liberal Brookings Institution think tank who recently served as a senior adviser to the Federal Reserve. But it is "going to help get household balance sheets back to the right place."

If one accounts for defaults, U.S. households' debt burden is shrinking a lot faster than the official data suggest. First American CoreLogic, which tracks the performance of mortgage loans, estimates that some 9.3% of the nation's 52.4 million mortgage holders were 60 or more days behind on their payments as of July. That represents relief on about $1.2 trillion in loans. The official data miss most of that, because the Fed doesn't erase debts until banks have foreclosed, sold the homes and taken the loans off their books, a process that can drag out for more than a year.

As a result, some economists are expecting a sharp improvement as widely watched indicators of consumers' finances catch up to reality. Joseph Carson, director of global economic research at AllianceBernstein, expects the share of households' after-tax income that goes to pay loans, rent and other financial obligations to fall to 16.3% by the middle of next year, well below the average for the 20-year period leading up to the housing boom. As of June, it stood at 18.1%.

"It's part of the cleansing process of a downturn," he said. "And it's happening a lot faster than people realize."

Cross-posted from Mouse Musings

Since the Bush administration’s legacy left the country suffering the worst economic crisis since the Great Depression, the number of unemployed has increased by 7.6 million to 15.1, and the official unemployment rate is just under 10%, For so many, just having a job – any crappy, horrible, badly-paid job – is better than no job at all. So few people are paying much attention to what is happening, and has been happening for quite some time, to those who are employed in what should be ‘good’ jobs; the increasing pressure on workers to work longer and harder, for less and less. Or else.

But sometimes the ‘or else’ isn’t just about losing your job. Let’s face it; there are some jobs where chronic fatigue and burnout are more hazardous than others. Flying for an airline for one. A few days ago, Northwest Flight 188 from San Diego to Minneapolis overflew the airport by more than 150 miles, out of radio contact with air traffic controllers for 80 minutes. Something sure as hell went very wrong 37,000 feet in the air with 147 unsuspecting passengers sitting in the back seats, and speculation is running rife about how two experienced and highly qualified pilots could possibly fly past their destination without either noticing. The chatter on just about every airline pilot forum is the same – suspicion falling on the most likely reason – the pilots simply… fell asleep. Luckily, no one died, except possibly two pilots’ careers.

Would be nice to think this was a one-off aberration. It’s not. A couple weeks ago, a Delta 767 with 195 passengers and crew landed in Atlanta on a taxiway instead of the runway, and investigators suspect fatigue as a factor; the crew had flown 10 hours and was landing at night. The third pilot, doing a checkride, had become ill during the flight, and was being cared for in the cabin as the other two pilots, distracted and tired, landed the jet on the wrong strip of asphalt. Not exactly the checkride they were hoping for.

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[Script reads: "We Are Creating the New Germany! Remember the victims -- Vote the National Socialist List". Larger image here.]

Following up on yesterday's correction of Rush Limbaugh's historical revisionism, noting that both Blackshirts and Brownshirts made their political bones by beating up on union organizers and socialists ...

From State of Deception: The Power of Nazi Propaganda, by Steven Luckert and Susan Bachrach, pp. 48-50:

In the final years of the Weimar Republic, Germany was mired in a grave political and economic crisis that left the society verging on civil war. Street violence by paramilitary organizations on the Left and the Right increased sharply. In the final ten days of the July 1932 parliamentary elections, Prussian authorities reported three hundred acts of politically motivated violence that left twenty-four people dead and almost three hundred injured. In the Nazi campaigns, propaganda and terror were closely linked. In Berlin, Nazi Party leader Joseph Goebbels intentionally provoked Communist and Social Democratic actions by marching SA [Brownshirt] storm troopers into working-class neighborhoods where those parties had strongholds. Then he invoked the heroism of the Nazi "martyrs" who were injured or killed in these battles to garner greater public attention. Nazi newspapers, photographs, films, and later paintings dramatized the exploits of these fighters. The "Horst Wessel Song," bearing the name of the twenty-three-year-old storm trooper and protege of Goebbels who was killed in 1930, became the Nazi hymn. The well-publicized image of the SA-man with a bandaged head, a stirring reminder of his combat against the "Marxists" (along with other portrayals of muscular, oversized storm troopers), became standard in party propaganda. In the first eight months of 1932, the Nazis claimed that seventy "martyrs" had fallen in battle against the enemy. Such heroic depictions -- set against the grim realities of chronic unemployment and underemployment for young people during the Weimar period -- no doubt helped increase membership in the SA units, which expanded in Berlin from 450 men in 1926 to some 32,000 by January 1933.

Someone's sounding just a little touchy, aren't they? Yes, Tim, you and your buddies from Wall St. have done such a bang-up job, I can understand why you're upset by all these questions:

WASHINGTON -- Treasury Secretary Timothy Geithner blasted top U.S. financial regulators in an expletive-laced critique last Friday as frustration grows over the Obama administration's faltering plan to overhaul U.S. financial regulation, according to people familiar with the meeting.

The proposed regulatory revamp is one of President Barack Obama's top domestic priorities. But since it was unveiled in June, the plan has been criticized by the financial-services industry, as well as by financial regulators wary of encroachment on their turf.

Mr. Geithner told the regulators Friday that "enough is enough," said one person familiar with the meeting. Mr. Geithner said regulators had been given a chance to air their concerns, but that it was time to stop, this person said.

Among those gathered in the Treasury conference room were Federal Reserve Chairman Ben Bernanke, Securities and Exchange Commission Chairman Mary Schapiro and Federal Deposit Insurance Corp. Chairman Sheila Bair.

Friday's roughly hour-long meeting was described as unusual, not only because of Mr. Geithner's repeated use of obscenities, but because of the aggressive posture he took with officials from federal agencies generally considered independent of the White House. Mr. Geithner reminded attendees that the administration and Congress set policy, not the regulatory agencies.

Mr. Geithner, without singling out officials, raised concerns about regulators who questioned the wisdom of giving the Federal Reserve more power to oversee the financial system. Ms. Schapiro and Ms. Bair, among others, have argued that more authority should be shared among a council of regulators.

"You are talking about tremendous regulatory power being invested in whatever this entity is going to be," Ms. Bair told the Senate Banking Committee last month. "And I think, in terms of checks and balances, it's also helpful to have multiple views being expressed and coming to a consensus."

Bair testified yesterday in front of the Senate committee on Banking, Housing and Urban Affairs and she probably caused Geithner's blood pressure to shoot through the roof. Oh well! I'm a big fan of hers and I appreciate her consistent support of workers and small business.

From the White House blog:

The President explains his plan to address one of the major causes of the current economic crisis -- the breakdown of oversight leading to widespread abuses in the financial world. The new Consumer Financial Protection Agency will have the sole job of looking out for the financial interests of ordinary Americans by banning unfair practices and enforcing the rules. This is a cornerstone in America’s new economic foundation.

Transcript below the fold.

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HOURS DECLINE FOR EMPLOYED

"The humanitarian benefit of unemployment insurance also causes people to look with less intensity for a new job." - James Sherk, labor economist at the conservative Heritage Foundation.

Don't you love it? Record layoffs, hiring contractions everywhere, and the wingnuts blame people who can't find the non-existent jobs. Or, even worse, the people who can't afford to work for $5 an hour. Geeze, they're all about economic self-interest: "What should I do - keep the unemployment checks that at least cover the bills, or take a minimum wage job that puts me in the red?" Wouldn't you think they'd get that simple equation?

These people are either nuts, or just plain amoral. What do you think?

People who still have jobs are faring worse than at any time since the Great Depression, a USA TODAY analysis of employment data found. Furloughs, pay cuts and reduced hours are taking a toll on workers who so far have escaped job cuts.

The employed worked fewer hours in May — an average of just 33.1 hours a week — than at any time since the Bureau of Labor Statistics began counting in 1964. Part-time work is at a record high. Overtime is at a record low.

The magnitude of job losses — 6 million jobs gone, a 9.4% unemployment rate — has overshadowed the groundbreaking nature of the nation's employment troubles, especially the financial decline of those still working.

"You can rip a whole chapter out of your Economics 101 textbook because the job market isn't behaving the way we were taught," says David Rosenberg, chief economist at money manager Gluskin Sheff and Associates.

Even working people have less to spend.

Businesses cut total wages at a 6.2% annual rate in the first quarter. Federal, state and local governments increased spending on wages by 6.1%, offsetting some of the decline.

The use of pay cuts — the last choice at most companies after hiring freezes, salary freezes and layoffs — shows how the recession is unlike any since the Depression, says Laura Sejen of compensation consultant Watson Wyatt.

"The recession has been broad, deep and long. No one has been immune," she says.

Baby boomers— 79 million people born from 1946 to 1964 — have been hit particularly hard.

Unemployment rates for workers 45 and older have soared to their highest level since at least 1948, when the government started tracking it.

Job losses for baby boomers come at a difficult time: during the traditional peak earning years, as retirement nears.

"It's hard for an older worker to compete in the job market with younger guys and women. The jobs may not pay what they were making," says Austin Sargent, an economist with Utah's Department of Workforce Services.

The average time a person has been out of work is at a post-Depression record of 22.5 weeks.

Congress' approval of higher and longer unemployment benefits may contribute to the extra time spent between jobs, says James Sherk, a labor economist at the conservative Heritage Foundation.

"The humanitarian benefit of unemployment insurance also causes people to look with less intensity for a new job," he says.

From The Daily Show:

AIG makes radical changes, Obama drops the executive salary cap, and the White House appoints Ken Feinberg as its pay czar.

In the meantime, my friends are telling me their college-aged kids can't find summer jobs. Thanks, BushCo!

SCOTTSDALE, Ariz. -- Jose Villareal once had a successful career as a franchising executive with Pepsi Co. Now, at the age of 67, he can't even get a job as a school custodian.

Mr. Villareal is among the growing numbers of retirement-age Americans battered by financial losses who are trying to get back into the work force -- or never left it.

Participation in the labor force by workers over age 65, which has been creeping upward in recent years, hit 16.9% in April, the highest for that month since 1971, the Labor Department said Friday. Meanwhile, unemployment for workers in that age group was up sharply in April from a year earlier, to 5.8% from 3.5%.

"We're just living day-to-day," Mr. Villareal said.

In an April survey, 22% of workers nationwide said they were "not at all confident" that they will have enough savings for a comfortable retirement, surpassing the number who are "very confident" for the first time since the survey began in 1993, according to the Employee Benefits Research Institute, based in Washington, D.C. A fifth of those workers said they now plan to work into their 70s. One in 10 doesn't plan to ever retire.

Retire? What's that? I'll probably have to keep plugging until the day I keel over.

Mr. Villareal's predicament is increasingly common in this Sunbelt city, where a fifth of the 215,000 residents are 65 or older, compared with one-in-eight nationwide.

Scottsdale's economy has long thrived on retirees, tourists and second-home buyers bringing their wealth to the city. Now, the massive loss of wealth in the U.S. has left the city vulnerable.

[...] The Villareal family's money troubles started earlier this decade, but have been exacerbated by the bad economy.

They lost much of their savings and cashed out their retirement funds in 2000 after a string of pizza restaurants Mr. Villareal opened in Mexico went bust. He then turned to running a small consultancy, but business dried up over the past year as the economy slowed.

Taking a big cut in pay, Mr. Villareal spent several months working in the cafeteria of a local high school, his daughter's alma mater, until a back injury ended that stint. Among other efforts, he applied for a custodian position in the school district, for which he was judged overqualified.

"I don't buy $200 shoes like I used to," said Mr. Villareal, dressed in a white polo shirt bearing a EuroDisney logo, chino shorts, loafers and ankle socks. "I'll wear these clothes for another 11 years -- what do I care?"

Because Mr. Villareal can't get a job, his 62-year-old wife, who had left the work force two decades earlier after the birth of their daughter, started working at a discount retailer where she earns $10 an hour.

Oh, boo hoo! How dare the Fed stop him from having his way? More to the point, how dare they say "no" to a Wall St. player? (Which begs the rhetorical question: Don't these people ever learn?)

CAINSVILLE, Mo. — No one seems to want to own a business in this dusty, windswept corner of rural America, population 370, with its crumbling sidewalks and boarded-up storefronts.

Except, that is, for J. Christopher Flowers, a media-shy New York billionaire who last year bought the First National Bank of Cainesville, one of the United States’ smallest national banks.

Mr. Flowers, a private equity manager, has no particular love for rural Missouri; in fact, he has never set foot in Cainsville. Rather, he wants to use the national bank charter he picked up in this farm town to go on a nationwide buying spree.

With that charter in hand, Mr. Flowers plans to take over a handful of large struggling banks, casualties of the economic crisis. In some cases, he hopes, the federal government will help.

But Mr. Flowers, whose investments in banks overseas have made him one of the richest men in America, has run into a major obstacle in the United States: the Federal Reserve, and its very notion of what a bank should be.

The Fed does not mind if private equity firms have a minority interest in banks — the Obama administration even wants them to invest. But the Fed will not let them take control, a stance the firms are lobbying regulators mightily to change, especially given that stress test results to be released Thursday are expected to show a glaring need for capital in the banking system.

It’s not personal, Fed officials say. It’s just that as the nation recovers from one of the worst banking crises in history, the Federal Reserve wants to make sure that it does not set the stage for the next financial implosion by turning banks over to private equity firms, some of the riskiest players in the business world.

So while Mr. Flowers was able to buy the bank here with his own money, he cannot tap into the billions his firm, J. C. Flowers & Company, has raised.

That's it. I think we need another good Sicilian kinky-haired, olive-skinned, jut-jawed lawyer from Manhattanin there mixing it up with these Banksters.

Pelosi calls for panel to probe Wall Street

Democratic House Speaker Nancy Pelosi, saying that the American people are demanding "discipline and accountability" following the multibillion-dollar federal bailouts, vowed today to initiate a legislative commission with broad oversight to investigate the causes of Wall Street irregularities and their full costs to taxpayers.

Pelosi, speaking to the Commonwealth Club of California, said she wants the panel to be modeled after the Pecora Commission, a bipartisan investigative body established by the U.S. Senate in 1932 to examine the causes and abuses of the Wall Street crash of 1929 and to prevent a repeat.
"They investigated what happened in the markets," including conflicts of interests and irregularities that set off such devastating effects on the U.S. economy, she said. When the commission issued its findings during the administration of Franklin Delano Roosevelt, "they had tangible recommendations," she said, which helped generate widespread public support for major banking system reforms and new securities laws.

You can watch the video segment Bill Moyers featured on PBS. He had a discussion about the Pecora Commission here. (h/t Heather)

You can view this video right here by getting the latest version of Flash Player!

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Robert Borosage has been calling for hearings on Wall Street for a while now.
CFAF just released a statement on this by Borosage:

We applaud House Speaker Nancy Pelosi’s pledge to create a special commission to investigate the roots of the financial collapse similar to the Pecora Commission that exposed the crimes and collusion's of Wall Street in the 1930s.

The devil, of course, is in the details – and the people. The commission needs subpoena power. It needs to be able to expose what appears to be widespread fraudulent and illegal practices – that can only be done with the power to demand production of documents and witnesses. It needs a large, aggressive and competent staff able to sort through volumes of material. It needs time to lay out the case to the public. And it needs courageous commissioners and a fearless prosecutor, a modern day Pecora, committed to unearthing the truth.

I was watching FOX News and every panelist was so terrified by the fact that there could be any kind of hearings about any of the garbage that happened these last eight years. They were calling in madness, but not what the Bush administration did of course. That's why the country is in this frakkin' shape. We need to know why and we need people held accountable.

I assume the administration thinks they're doing the right thing by pouring billions into the banks, but things seem to be getting worse for everyone else, don't they?

A registered nurse came close to losing her $1,550-a-month apartment on the Upper East Side after being let go from two jobs in three months. A woman found herself dipping into a 401(k) to keep her $3,375 unit in Peter Cooper Village after her husband was laid off in February from his six-figure marketing job. A father of two with an M.B.A. and a law degree owed $5,400 in back rent in Stuyvesant Town after he struggled to find steady work and lent money to his wife’s family.

Lawyers, judges and tenant advocates say the staggering economy has sent an increasing number of middle-class renters across New York City to the brink of eviction, straining the legal and financial services of city agencies and charities. Suddenly, residents of middle-class havens like Rego Park in Queens and Riverdale in the Bronx are crowding into the city’s already burdened housing courts, long known as poor people’s court.

Even some affluent people in high-end places are finding themselves facing off with landlords. One man, laid off by Merrill Lynch, was forced to move out of his $5,700 apartment in TriBeCa, owing $20,000 in back rent. Todd Nahins, a lawyer who represents owners of luxury residential buildings, has been busy negotiating payment plans for tenants in arrears.

“There’s definitely an uptick of people who were basically very good rent payers until the economic downturn,” Mr. Nahins said. “There’s so many of them. People who at one point had made money are now not earning enough to pay their rent.”

It was smart to address this, because the wingnut echo chamber in talk radio is pushing the idea that "fascist" Obama wants to take over and run more private industries:

WASHINGTON -- President Barack Obama said he wants to get the government out of the private sector as fast as possible -- but that as long as his administration is acting as a major shareholder for large sectors of American commerce, from cars to finance, he won't hesitate to shape decisions at those firms.

President Barack Obama speaks during a news conference marking his 100th day in office in the East Room at the White House on Wednesday.

In his most extensive public comments to date on the principles guiding government-ownership stakes, Mr. Obama said at a news conference Wednesday that "I don't think that we should micromanage." But he added that, in the name of protecting taxpayer dollars, the government would help troubled companies make "tough decisions based on realistic assumptions."

"Like any investor, the American taxpayer has the right to scrutinize what's being proposed," he said at news conference marking his 100th day in office. "I don't know how to create [an] affordable, well-designed, plug-in hybrid, but I know that if the Japanese can...then doggone it, the American people should be able to do the same."

[...] In addressing the government's role in the private sector, Mr. Obama said his administration had no choice but to step in as the financial and auto sectors were collapsing and that "our first role should be shareholders that are looking to get out."

"I don't want to run auto companies. I don't want to run banks. I've got two wars I've got to run already. I've got more than enough to do. So the sooner we can get out of that business, the better off we're going to be," he said. "I want to disabuse people of this notion that somehow we enjoy, you know, meddling in the private sector."

Do we really need another trillion dollar war? Food for thought from Brave New Films. Watch Pulitzer Prize-winning authors and journalists, military and foreign policy experts, leading economists, and many more explain just how much the war in Afghanistan will cost us over how many years.

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Larry Summers' address before the Economic Club in Washington D.C. on Thursday was interrupted by two members of Code Pink who jumped on stage with a banner, yelling derogatory comments.

Both Larry Summers (L), the Director of President Obama's National Economic Council and David Rubenstein, Economic Club of Washington President and Co-Founder and Managing Director of The Carlyle Group, seemed to take the disruption in stride. When asked by Rubinstein if he ever regretted taking the job Summers replied "There are moments that are more pleasant and some that are less pleasant. ... Honestly, I felt honored to be asked by the president to help at this moment."