Sunday, April 5, 2009

"Something Really Awful in Washington"

Who is Elizabeth Warren and what has she been saying?

First question.  Ms. Warren is Chairperson of the Congressional Oversight Panel watching the TARP bailout funds.  She is a law professor at Harvard.  She was a blogger for, first, the Huffington Post and then TPMMuckraker, both definitively left-of-center websites, so one can assume that, as Howard Dean once said, she belongs to the Democratic wing of the Democratic Party.  

Second question.  What has she been saying about Treasury and her mission to watch the TARP program (and presumably PPIP)?

Ignoring leaks of what an upcoming report may say and recommend, here is a report of an interview she did with (liberal) interviewer Rachel Maddow (from TPMMuckraker):

Warren: Is AIG Bailout Money Going To Pay Off "Speculators"?

Looks like you can add Elizabeth Warren to the growing list of people who want the federal government to tell us more about that latest AIG bailout.

Warren, who chairs the panel that's monitoring bailout spending on behalf of Congress, went on MSNBC's Rachel Maddow Show last night, and all but demanded more disclosure from Treasury Secretary Tim Geithner.

Maddow raised the fact that AIG has reportedly passed bailout money onto its counterparties on those credit default swaps, and that it currently has four PR firms on its payroll. In response, Warren, appearing perhaps more frustrated than in any of her other numerous media appearances over the last few most (Ed: typo:  "months"?), responded:

"It doesn't seem strange to me, and the fact that it doesn't seem strange to me tells you something really awful about what it's been like to be in Washington for the last few months.

These financial institutions have figured out that they're bleeding red ink, and their best solution is to persuade the Treasury Department to give them lots of money. And when the Treasury Department starts to say, there may be some problems here, the American people don't want to go along with this, then lets see if we can spin the American people on it.

The Treasury Department has not asked for the critical information about where this money has gone, from AIG. We've poured the money into AIG, and it has somehow poured it out the other end. The Treasury Department has not asked, and has not revealed, what it is that's happening with that money.

And so as long as that's the case, maybe some of the money is going to other financial institutions. Maybe some of the money is going to pay off these credit default swaps that are essential for saving other institutions that have counted on it for credit and insurance. And maybe some of where this money is going is just off to speculators, who just played the game of speculation, and would now like to collect a hundred cents on the dollar form their speculations, and collect it indirectly from the American taxpayer. . ."

(TPM CONTINUING):  . . . Reports by Warren's panel have grown increasingly critical of Treasury's level of transparency and accountability in regard to the bailout.  (Emphasis added)

This is disconcerting.  We know that AIG itself (not Treasury) released data on where it funneled its bailout money, and as soon as it released this info (on a Sunday afternoon!), the President and Congressional leaders stirred up a faux outrage to divert the public from that scandal and instead made villains of some AIG employees who received bonuses of a trivial amount relative to the tens of billions of dollars that went to Deutsche Bank and Goldman Sachs et al.  Thus we can be certain that Treasury is working in concert with the Establishment to deceive the public on the extent of the looting.  This is of a piece with the post yesterday displaying the entire transcript of William Black on the Bill Moyers show.

Here is a strange situation.  A President was elected who was rated the most liberal Senator in the year 2007.  He embraces every liberal orthodoxy re climate change, Guantanamo, embryonic stem cell research, deficit spending, etc., except the policies which are core for the allegedly discredited Bush policies:  foreign wars and financial cronyism.  He ramps up the war in Pak-ghanistan and gives the banksters all they want.  The critics of these Big Finance giveaways now come from his left flank:  Ms. Warren, Paul Krugman, Yves Smith of Naked Capitalism, or from people of uncertain political leanings (so far as I know) but not known to be conservatives, such as Simon Johnson and Kenneth Rogoff.

His early actions suggest that Barack Obama was sold to America as a new face by the Establishment to perpetuate its interests.  He has, however, the thinnest resume of any President in memory.  What happens next is therefore even more uncertain than usual.

Most of us who are active in the markets cannot wait for politics to "go away" as it did throughout most of the Reagan-Bush I-Clinton years, when investors and speculators focused primarily on the markets, the economy, the Fed, etc.  So long as the White House and Congress, with their obvious immense power to affect sentiment in the short run and to affect the economy, are so massively involved in so many aspects of the economy, along with the most politicized and manipulative Fed in over 30 years and perhaps in history, an old saw may be relevant:

"Making predictions is difficult, especially about the future." 

If Elizabeth Warren cannot get good information out of the agency she is overseeing, then you should consider NOT TRADING the markets.  "Anything goes."  Right now what is going, going, gone is the core of democracy:  openness and fair dealing.  Trying to guess the price of anything from day to day or week to week is impossible in such an environment.  Perhaps that's what Nouriel Roubini is signaling with his post from 2 days ago that he is essentially invested in nothing but cash, along with the report that Ray Dalio of Bridgewater is ignoring stocks from either the long side or the short side for the nonce.

Copyright (C) Long Lake LLC 2009

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