Each morning, Bill Scher and Terrance Heath serve up what progressives need to affect change on the kitchen-table issues families face: jobs, health care, green energy, financial reform, affordable education and retirement security.
Citigroup Testimony Highlights Need To Crackdown On Risk-Taking
NYT reports former Citigroup Chairman Bob Rubin hit harder than former CEO Charlie Prince, in Financial Crisis Inquiry Commission: "Mr. Rubin stopped short of accepting personal responsibility. He grudgingly conceded that a few savvy investors saw the crisis coming, asserting that nearly everyone in the financial services industry had failed to see a dozen powerful forces — from excessive debt levels to trade imbalance — come together in a perfect storm ... Mr. Rubin’s stance left several members of the panel angry."
Reuters' Felix Salmon mocks Prince's claim of inability to rein in Citigroup's risk-taking: "... this is a prime example of Prince not answering the question. [Commission member Byron] Georgiou didn’t ask Prince why Citi hadn’t quit the leveraged loan business entirely: he asked why Citi had trebled the size of its leveraged loan business during a time when Prince claimed to be concerned about the risks involved and indeed, by his own account, specifically asked regulators to step in and impose limitations."
Naked Capitalism's Edward Harrison sees Prince as acknowledging Wall Street perversely rewarded for taking reckless risks: "...Prince has essentially confirmed that risky behavior drives out prudent when risk is rewarded. Either 1. The Fed has to take the punch bowl away and reduce the rewards for risk or; 2. Congress has to pass laws breaking up risky institutions into less risky pieces..."
OurFuture.org's Zach Carter focuses on questioning of Comptroller of the Currency John Dugan, sees implications of return of Glass-Steagall: "Dugan here is acknowledging that Citigroup was subjugating the practices of its commercial lending to suit the activities of its investment bank ... If the Glass-Steagall repeal hadn't allowed Citi to combine an investment bank and a commercial bank, it wouldn't have made so many subprime loans."
Bank of America looking trade consumer financial protection agency for other concessions. Wonk Room's Pat Garofalo: "...what does BofA want? Well, according to one of its spokesman, 'we support the idea of a consumer protection entity, consistent with the principles of federal preemption.' ... Complete federal preemption would mean that nationally chartered banks, like BofA, would be immune from state consumer protection laws that go further than those set at the national level."
Matthew Richardson and Nouriel Roubini call for a bank tax designed to reduce risk in W. Post oped: "The amount of the fee would vary according to each bank or financial firm and would include two key elements: an insurance premium based on whichever of the institution's debts carry a real or implied government guarantee (akin to the FDIC system already in place), and a fee that reflects the institution's contribution to a potential large-scale, systemic crisis. All large and inter-connected firms will want to minimize the fee they must pay, so each will have an incentive to choose less risky activities and to take on less debt, leading to a safer and sounder financial system."
China Appears Ready To Adjust Currency ... A Little
China consensus emerging on gradual loosening of currency controls, but questions remain. NYT: "The Chinese government is preparing to announce in the coming days that it will allow its currency to strengthen slightly and vary more from day to day ... But if China allows only a small move in the renminbi, the effects on the American trade deficit may also be small ... transportation and communication costs are plunging [in China] because of heavy investment in new expressways and rail lines."
W. Post says increase in Chinese currency value may only be 3%. "Xia Liping, a professor specializing in U.S.-China relations at Tongji University in Shanghai ... said the yuan probably would be allowed to increase only 3 percent a year at most in order to avoid domestic upheaval, such as mass unemployment in the export sector. Some Western economists have said the yuan is undervalued between 20 percent and 40 percent."
NYT's Paul Krugman prepares to be underwhelmed: "I won’t pass judgment on the apparent agreement about the renminbi until I get some sense of what magnitude of adjustment we’re talking about here. I fear that it will be cosmetic — a tiny rise and bit of flexibility, just to silence the Obama administration for a while."
Economic Populist's Robert Oak already underwhelmed: "The Street Insider is reporting it's 2%, relative to the U.S. dollar. 2% is not even the 5% we previously heard for a one time currency re-evaluation!"
OurFuture.org's Dave Johnson squares off with CATO on China policy in CNBC debate.
The Real Lesson From Greece
NYT's Paul Krugman on the real lesson of the Greece fiscal crisis: avoid deflation. "So how did the U.S. government manage to pay off its [World War II] debt? Actually, it didn’t ... The ratio of debt to G.D.P. fell not because debt went down, but because G.D.P. went up ... the result of economic growth and inflation ... Greece can’t expect a similar performance. Why? Because of the euro ... America’s public debt will be manageable if we eventually return to vigorous growth and moderate inflation. But if the tight-money people prevail, that won’t happen..."
Dean Baker criticizes W. Post story promoting international debt hysteria: " The Washington Post told us in no uncertain terms that things will have to be pretty bad, no two ways about it. Only those who bothered to read to page two would find out that there is actually considerable uncertainty about the point at which debt really poses a serious burden on the economy [and that] the United States actually had a debt to GDP ratio that was nearly twice as high as it is presently. This did not prevent it from having three decades of extraordinarily rapid growth."
Debunking The "16,000 IRS Agents" Health Care Lie
FactCheck.org debunks, and tracks, the conservative smear that health reform law will require hiring 16,500 IRS agents: "...a partisan analysis based on guesswork and false assumptions, and compounded by outright misrepresentation."
Ezra Klein nails Newt Gingrich's employment of the smear: "'One of the things in the health bill is 16,000 additional IRS agents,' [Gingrich] said. First, that's not a 'thing in the health bill.' It's an extrapolation from a CBO report. Second, the word 'is' is wrong, as even the original GOP spin only used the word 'may.' Third, the number 16,000 is wrong. Fourth, the word 'agents' is wrong ... Not just anyone could pack four falsehoods into 13 words. But Gingrich, now, he's a professional."
SEIU starting new political party in North Carolina, reports The Plum Line: "The new project is an outgrowth of SEIU’s earlier vow to hold House Dems accountable for voting against heatlh reform and against labor’s interests in general ... It’s also unclear what kind of cash SEIU national will put into this effort..."
Republican Leaders Meet In N.O., Forget About Katrina
Republican leaders meet in New Orleans, make no mention of Hurricane Katrina, praise former President Bush reports Politico's Ben Smith.
Gingrich urges next Congress to shut down the government. Salon.com's Mike Madden: "'When we win control of the House and Senate this fall, stage one of the end of Obamaism will be a new Republican Congress in January that simply refuses to fund any more,' [Gingrich] said ... In other words, shut down the government. Which, of course, worked out very well for Gingrich the last time he tried it."
