I tried to write this post several times over the past week or so. What follows is more or less my notebook, 21st century style.

Just to come out with it right away, things are happening to the structure of US capitalism that are very disturbing.

The ink from Bush’s pen had not yet dried when the execution of the bailout plan was delayed until after the elections. Meanwhile the Fed has begun lending directly to corporations. “Investors remain unconvinced any of it will work,” as if the four wisest oligarchs were working for anyone except their own power circle. There’s a crisis, you understand, and one must take care of one’s own. Now they’re talking about changing things up, which is a priori justified because no one liked the bad asset-buying plan the Senate gave Paulson the authority to enact. Contrary to popular belief, no previous version of it was ever going to do anyone any good, not until after things stabilize and we get to see which CEOs are on Paulson and Bernanke’s Blackberries (as if we can’t already guess). The progressive left, who were generally aware along with almost everyone not on television that the bailout was always a scam, should match their rhetoric to the only rational conclusion at this point: that the purpose of the plan was to concentrate power in the finance sector, not fix the economy. All signs suggest that aim is still intact. According to numerous observers, including the Treasury itself in that conference call, the new bill’s much-hyped oversight is navigable. If it weren’t, Paulson would not have the flexibility he needs to do what he needs to do, whenever he needs to do it. Instead of a democratic or even a meritocratic solution, responsibility has been delegated to another decider and his cronies.

A quick browse of Nouriel Roubini’s archives reveals that this whole thing is the performance of last year’s dress rehearsal, when Citigroup, JPMorgan Chase, Bank of America, and Wachovia banded together to create a multi-bank asset-buying machine, or more precisely a MASTER LIQUIDITY ENHANCEMENT CONDUIT. Despite Paulson’s (and covertly the Fed’s) enthusiastic support, this “super SIV” (security investment vehicle) was denounced as a cartel intended to insure the survival of the institutions most responsible for the housing bubble and eventually canned. Does this (from October ’07) sound familiar to anyone?

The new entity would raise money by selling commercial paper and use the proceeds to purchase highly rated assets from certain existing vehicles “that choose … to take advantage of this new source of liquidity,” the banks say in a press release.

In other words, it would move good loans out of the existing vehicles, leaving them with the bad ones.

Why investors would be willing to fund these assets by buying commercial paper from the new entity but not the old ones is not clear to me.

Citigroup spokeswoman Danielle Romero-Apsilos says in an e-mail, “Some of the recent stresses that we have seen in the market have developed more as a result of illiquidity rather than deteriorating credit. As a result, some sectors of the market, such as (asset-backed commercial paper), have been functioning less efficiently than previously. Given the importance of this sector, the private sector created this (conduit) as an alternative, optional source of liquidity for the SIVs, with the objective to facilitate a solution that enhances the orderliness of the market for high-quality, highly rated assets.”

Mike Englund, chief economist with Action Economics, explains it another way:

“Suppose there is a line of Fords whose engines blow up in flames. Customers can’t differentiate these cars from other cars, so they stop buying all cars. The automakers say, ‘We’re going to buy the good cars and distribute them through a special vehicle that ensures they don’t blow up.’ It’s the deterioration in good assets that’s the problem here.”

Whalen isn’t buying it. The new conduit “is exactly the same” as they old ones, he says. “They’re going to aggregate them, sprinkle magic dust on them, the Treasury secretary will issue statements and everybody hopes it will be better. They’re just making a bigger mess, putting it all together in one place. It’s tantamount to a government bailout later this year.”

Oh, and speaking of power grabs, fears among Democrats of martial law during bailout deliberations were not entirely unjustified, since with the combination of the John Warner Defense Authorization Act, the Military Commissions Act, and the National Defense Authorization Act, the laws are in place for it, at the order of any future president.

(which is exactly what they want you to think)

An irrepressible desire to believe in bullshit on the part of most educated middle-class Americans has neatly bottled up media dissent over this cascade of violations. Group psychology does not function dissimilarly from an individual body. Once the center of gravity is taken, the body is not just subject to outside influence, but dependent on it, while the brain is reduced to an observation deck. This moment between loss of stability and pain has a narcotic effect. The mediasphere equivalent begins with the extraction of the right compromise, uttered in the name of reason and solidarity, brought about in this case by the irrational simplification of crisis. “Well, it wasn’t ideal, but it was necessary” = our song of innocence and absolution. We heard the cries of moral outrage, now we’re all ready to “move on.”

(I will now spend the days before the election speculating on just how Kerry’s significant October lead in 2004 could possibly have failed him against an already much-loathed incumbent.)

(encouragingly, the U.S. may be forced into changes that are sensible, before the next election)


13 Responses to “Concentrate”

  1. (I will now spend the days before the election speculating on just how Kerry’s significant October lead in 2004 could possibly have failed him against an already much-loathed incumbent.)

    There was a lot of wishful thinking among Democrats in 2004. This is (genuinely) different.

  2. traxus4420 Says:

    hey your link isn’t working — how will i soothe my paranoia?

    no, i expect obama’s lead will be much too great for any vote heists to occur, i’m just also compelled to knock on wood after saying that.

  3. I’ll knock on wood here too.

  4. I haven’t had time to read the whole piece, but the title is perfect–on Saturday here, in particular (and maybe elsewhere too), it was only one’s most closest things that could break attention away from the hypnosis. I couldn’t read anything but TPM and Krugman and NYT and watched Martha Graham videos over and over. It was like a slow cancerous version of the heart-attack version of 9/11–except this is more searing, because there is no real or faked comaraderie most of the time. What interested me was seeing a lot of street types who really knew the material about Lehman Brothers, AIG, etc., but if they see only television they miss the stock market rally yesterday, etc. Almost anybody understands better than I do what buying up toxic mortgage-backed securities means.

    McCain so pathetic, though, knocking on wood only necessary for extra insurance. There’s been talk of the ‘Bradley effect’, but I doubt it, because Obama is amazingly cool, and there is a weird sense of race not even involved in it except when McCain and Palin literally shove it up our asses. I think when McCain finally relented and faked an objection to the woman who said Obama was ‘an Arab’, McCain meant ‘No ma’am, he’s not an Araba, etc…’ he actually meant something racial, but none of that stuff is working–which, as of this morning, doesn’t mean they haven’t stopped doing it. Obama was very cool with Tom Brokaw’s blatant rudeness, so I’m sure he’ll deal with the planned mention of Ayers tomorrow night equally well. Plus, he knows when to insert the toughness at exactly the right time, and not before. And he is interesting as a person in that you cannot remember that he is black until you remind yourself, or it’s brought up. It’s like an actual demonstration by a single person of the old cliche of ‘color-blindness’ that people tell themselves they’re supposed to learn–but Obama makes you do it automatically. Of course, he’s not specifically a ‘black leader’, of course, nor should he be primarily. There are plenty of those still active and out for junkets just like the AIG execs, although of a different nature (Sharpton’s trip to Los Angeles to call attention to Paris Hilton’s escape from prision even after she was returned to it had not been given enough press attention, because he is allowed to get away with his evil just the way the Wall Street shits are, just less costly; anyway, since it was about ‘unfairness to blacks’ that she only spent 2 or 3 days at first, it was just cheap shot shit, and then Nicole Richie, part black, spent 81 minutes. Even so, he’d gotten a new junket out of it).

    It surprises me that a lot of us previous Hillary supporters now embrace Obama fully. I didn’t think I really would, even though I knew I’d vote for him. Now that I’ve watched him work, it’s very impressive technique–and the things he is saying now are much more like what Hillary was saying before, not so ‘airy’ and ‘dreamy’ and Kennedy-imitating (often badly), and he is saying it better than she was, partly because she can never escate from her hound-dog husband. He’s just what we need right now, and really is superbly gifted.

  5. traxus4420 Says:

    jonquille –

    andrew sullivan agrees with you about obama.

    i’m sure the way he puts one at ease about race in general is a big part of his appeal, something mccain, whose ‘whatever sticks’ approach has worked horribly for him, just does not seem to understand. people like to criticize multiculturalism by saying that you can’t get passionate about it, but i think obama proves its appeal is that when it’s working you don’t have to. same with liberalism. of course i find this ‘depoliticizing’ and not great, though at the presidential level it has to be this way or it fails. so race is an obstacle obama has effortlessly transcended rather than something he’s become an activist for. but this is educational for what ‘depoliticizing’ means and why many people accept it and even strive for it, even those with something at stake. ‘justice’ is not necessarily an attractive option in all cases and probably not the most comfortable in most. the bailout being another prime example.

    people appear to be satisfied with ‘greater dialogue.’

  6. “people like to criticize multiculturalism by saying that you can’t get passionate about it, but i think obama proves its appeal is that when it’s working you don’t have to. same with liberalism.”

    That’s brilliant, truly. And equally the part about how multiculturalism really does have no appeal until it’s demonstrated, rather than just talked up–at least that’s the case for many of us. It’s fascinating to see the big Republican columnists end up having to praise Obama, although Krauthammer had to have one last bleat in WaPo today–and it is ridiculous, because the McCains knew that Obama ‘as black’ was not going to work anymore, they didn’t leave it out because of their sublime integrity; they let people use terrorist and Arab instead, and anyway, Krauthammer is lying, because they DID call Obama ‘a person of the street’. And there’s the Food Stamp thing yesterday somebody in Colorado, I think, did. TPM has this unbelievable YouTube of people at a McCain rally in Johnstown, PA talking the most unbelievable redneckery I think I have ever heard per square electron.

    Have you seen some of the writeups our Shanghai friend has come up with? He really is a fantastically interesting character, and I find it so strange that he goes for all these Washington Old Men types like Rumsfeld, Cheney and (although younger, who cares? he’s just a lot of whale blubber) Rove. Living in China, he doesn’t really understand certain things about America, except the harder data like ‘The Americans wouldn’t save’. China, therefore, goes about a kind of capitalism he enjoys, because it’s in a way ‘pure’ and contains none of the cultural expression that the West has except when they’re doing imitations of it (this seems to be something that has spread from China to Japan, which started doing American-type suburbs in the 90s, and were they ever weird. The Chinese now love B’way shows and are starting ”Piano Lesson in Every Home’ almost as if it were ‘Chicken Every Sunday’) His piece on the other economist was very interesting, though, but since the guy (I can’t remember the name) was actually praising the risk-taking even if it took the form of sub-prime mortgage-holders, this rather subverts the case against the ‘spoiled American.’ A number of people have trouble with Krugman’s Nobel, but I think his fierce energy has been very instrumental in getting the Brown-tailored plan in place, and which appears to have quelled the worst part of the panic, meaning that, even if there are others, they’ve convincingly worked on it and had not been able to shove through in the usual way the thoroughly unacceptable plan that Paulson started with. Plus, the most pessimistic economists are now seeing a slight melt in the credit freeze. I think it’s been a most extraordinarily overrich moment, and yet I don’t yet know how to assess how AIG’s profligate behaviour ‘dreamed my dreams for me’ just like a TeeVee during that period they went on a junket 3 weeks ago and are now being prosecuted by Andrew Cuomo for it–I mean, because it was like they did manage to dream my dreams for me during that period. It is strange, but there was unquestionably a matter of incompetence demonstrated as having been existing, because cooperation was forced into play by Democrats and economists who would not accept the mauling the Bushies were once again trying. They could be said, of course, to be ‘incompetent’ only because they were not allowed to put into place their ‘seemingly-incompetent’ plan in place that would, according to some, have achieved their immediate goals. It’s not at all clear those goals were the only ones they had in mind, if only because they know the heat of constant panic in their own country would not be as easily accommodated as war in Iraq, etc.

  7. I should have said ‘spread to China and other parts of Asia from Japan’.

  8. Another thing I thought interesting was that in the last debate, people all said how ‘angry’ he was. Yes, but that wasn’t the main thing. From the very beginning, he was absolutely terrified, overwhelmed with stage fright, finally exposed as a total coward, afraid to get out in the ring. His campaign required that he ‘say Ayers to Obama’s face’, but he did it so poorly, saying ‘I don’t care about an old washed-up terrorist’, and with no conviction. I imagine this is one of the bits of slack the msm still cuts McCain because of his POW history, etc., and that’s wise for many reasons. For one thing, you can’t really prove it, but Josh Marshall also mentioned that McCain kept ‘hyperventilating.’ But I think he was scared more than angry, and doesn’t even really want to be president. Rather, he has to go through the charade of it for a couple of weeks, and that’ll be it. Kristol is about the only one of the neocons who still supports the Palin choice. I think he’s relatively young to be as obviously senile as he is.

  9. And yet, the thing I forgot to mention in the first comment was inspired by Pennsylvanians now supporting Obama much more. They were Hillaryites too, the Dems rather, and it’s peculiar to see that even though there are the scum low types of Americans as above, but I’ve noticed and been very surprised that more are listening and thinking harder with this campaign than in 2004. It’s already a tight race, and tightening, but I suppose it’s the financial crisis that’s making them pay attention. (Apologies for getting off-topic here, it’s an extended riff on your title,though, and I find that the whole atmosphere has definitely changed, and that when it subsided again for a moment, that seems exceptional, say when I’ll get a hearty appetite again. )

  10. traxus4420 Says:

    feel free to digress as much as you want — i renounce all stalinist overlord policies toward comments, as long as it stays easy to do so.

    the mccain stuff i’m past finding disgusting, it’s just pathetic, and takes on new dimensions after you read david foster wallace’s glowing endorsements of the man’s character and toughness written over the last election cycle. clearly the route for any republican who wants to make it big will be to denounce bush and ‘corporate power’ while talking up ‘communities’ instead of individual responsibility — if they’re also war heroes they will receive instant fellatio from sultry liberal elites everywhere.

    the response to the burst housing bubble is just more evidence of how exceptional the bush administration and the culture of super-elites under his reign has been, when people who aren’t politically invested in anything more selfless than america’s continued global dominance have to become activists to get washington to respond pragmatically to a crisis everyone knew was coming.

  11. traxus4420 Says:

    i haven’t read the latest output of our shanghai correspondent — do you mean as spengler? have any links?

    i think he has a fetish for people without ‘culture’ in the european sense, which is intensified by the presence of technology and math skills. when i briefly lived there, i could feel the things i think attract him — a science fiction version of the way one imagines european bourgeois in america must have felt in the 19th century, where you have to fight for survival like any other big city, but with this comforting absence of moral significance.

    which is an illusion, since there is a powerful morality in chinese culture, but as it’s so family-based most of it doesn’t apply to foreigners.

  12. Ha ha–the link to him is here, for chrissake, this is where I always go and look at it. I think you are spot on about him here, yes, this is really good.

    Yes, he has an absolute hatred for European culture when he’s pushing the ideologies he so adores–but in the Spengler will appear very unexpected things that he never said on the blog before: admiration for Bergman’s ‘Virgin Spring’ (an astute choice, I happen to agree that is Bergman’s best, like a legend), admiration for Obama by now at least as an intellect.

    Agree about the sci-fi quality of what modern Shanghai has to be, and the only reason I’ve resisted his book thus far. I may get to it in the spring, though, because he really does write beautifully while remaining weird beyond imagining. Got to be some Freudian stuff in there about the Old Men of the GOP though. He wrote a lot of absurd stuff about Amazon Palin, and it’s interesting because he can’t identify with what it’s like to be an American just because he wants to repudiate Old Europe which includes Old Britain. He got me to read that Neal Stephenson thing ‘Diamond Age’, which I thought the most filligreed unbearable thing I ever ended up skimming through. The attraction is to an amoral power, I would agree. But like the hard-leftists, a spirituality, whether or not religious, is always ridiculed as something only for the Middle East, it seems…or rather, THEY do, I at least give Spengler credit for having no truck with ANy religions, and I only like the ones that Martha Graham covers in her glorious creations. I’m not kidding–when I watch ‘Night Journey’ about Jocasta and Oedipus or ‘Appalachian Spring’, I know all about what something holy is. And I DON’T need Marxists to tell me what for about something I understand a lot better than they do, whether or not a ‘flight from materiality’ is expeditiously enabled.

  13. […] (another incomplete history for the forgetful) […]

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