As I have written previously the Obama Administration is not dealing with the financial crisis. Today, Krugman writes:

[Obama] officials still aren’t willing to face the facts. They don’t want to face up to the dire state of major financial institutions because it’s very hard to rescue an essentially insolvent bank without, at least temporarily, taking it over. And temporary nationalization is still, apparently, considered unthinkable.

But this refusal to face the facts means, in practice, an absence of action. And I share the president’s fears: inaction could result in an economy that sputters along, not for months or years, but for a decade or more.

Speaking for me only

About a week ago, Theda Skopcol wrote:

In such marked contrast to the timid triangulation of Clinton, Obama offers a strong, positive statement of the role of U.S. government in national development, past and for the future. Government does not "substitute" for business or individual action, but it is an essential "catalyst."

Today, David Brooks writes:

Memorandum

To: Evan Bayh

From: American People

Re: Repealing Bush Tax Cuts

Do you support or oppose raising taxes on households earning over $250,000 a year and, at the same time, lowering taxes for most other households?

Support 66
Oppose 33

Speaking for me only

National Journal's weekly Washington Insiders and Bloggers Poll asked the following questions:

Do you expect another economic stimulus plan will be necessary in the next year?

How concerned are you that federal economic recovery aid has gone or will go to people and businesses that don't deserve it?

I'll ask the second one here in a poll below.

It appears that Treasury Secretary Tim Geithner simply will not bite the bullet. NYTimes:

[T]he Treasury Department announced on Friday that it would vastly increase its ownership of the struggling company. After two multibillion-dollar lifelines failed to shore up Citigroup, the government will increase its stake to 36 percent from 8 percent.

Under the deal, the Treasury Department has agreed to convert up to $25 billion of its preferred stock investment in Citigroup into common stock, giving taxpayers more risk, but more potential for profit if the company recovers. The Treasury will convert its stake to the extent that Citigroup can persuade private investors, including several foreign government investment funds, to go along. . . . The Obama administration deliberately stopped short of securing a majority or controlling interest in Citigroup . . . Taxpayers, after pumping more than $45 billion into the bank, have become Citigroup’s single largest shareholder. The government will not put in any additional money for now, but some analysts believe Citigroup may require more down the road.

This is simply ludicrous. Bite the bullet now Geithner. "Temporary takeover" of Citi is inescapable. Start fixing the problems now.

Speaking for me only

President Obama's 2010 budget was released today. It amounts to $3.55 trillion and, according to the Washington Post, will push the deficit to $1.75 trillion.

Included is a $634 billion health care fund. How will it be paid for? In large part, by increasing taxes on those earning more than $250,000. [More...]

For the past 38 years, I've read the Rocky Mountain News daily. Tomorrow will be the last day. The paper will cease publishing Friday.

Maybe I shouldn't have stopped my subscription and read it solely online the past five years. Or maybe Denver doesn't need two dailies. [More...]

Some highlights:

-increasing taxes on the wealthiest Americans and using revenues from a new program: selling carbon credits to manufacturers as part of a cap-and-trade plan meant to slow climate change.

-a proposal to phase out government payments to crop producers making more than $500,000. Additional revenues are posited from a tightening of tax-code enforcement.

-use revenues from the centerpiece of his environmental policy — a plan under which companies must buy permits to exceed pollution emission caps — to pay for an extensionof a two-year tax credit that benefits low-wage and middle-income people.

[More . . .]

Why was I asking for specifics in President Obama's speech last night? Because the severe problems we face need more than vague platitudes. To put it bluntly, the Obama Administration is fiddling while our financial system burns. Here is Krugman on the nonexistent plan for the financial crisis:

Ben Bernanke’s testimony over the past two days gives us our best clue yet about where the administration and the Fed are going with bank rescue. And the answer seems to be … nowhere. . . . More and more, it looks as if we’re headed for the decade of the living dead.

Pretty speeches in February 2009 won't be worth a hill of beans in elections in November 2010 and 2012.

Speaking for me only

NYTimes:

The Obama administration put the nation’s biggest banks on notice Monday that the government could become their biggest shareholder if regulators decide they are not strong enough to weather a deeper-than-expected downturn in the economy. In an unexpectedly assertive joint statement, the Treasury Department, Federal Reserve and federal bank regulatory agencies announced that the government might end up demanding a direct ownership stake in major banks after they undergo a tough evaluation of their strength, which is to begin shortly.

[More...]

Via Atrios, here is the latest proposed ripoff of taxpayers for Citibank's benefit:

Citigroup (C) has proposed that the US taxpayer and other preferred shareholders convert up to $75 billion of preferred stock into common stock, thus bolstering the company's tangible equity and putting it in less desperate need of a complete takeover. And what will the US taxpayer get for this preferred stock conversion? 40% of the company for some of its $45 billion of preferred, say reports. The reports add that Citigroup's goal here is to keep the US's ownership under 50%, so this won't be a de facto nationalization.

[More...]

Krugman today:

Alan Greenspan, the former Federal Reserve chairman — and a staunch defender of free markets — actually said was, “It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring.” I agree.

The case for nationalization rests on three observations. First, some major banks are dangerously close to the edge — in fact, they would have failed already if investors didn’t expect the government to rescue them if necessary. Second, banks must be rescued. The collapse of Lehman Brothers almost destroyed the world financial system, and we can’t risk letting much bigger institutions like Citigroup or Bank of America implode. Third, while banks must be rescued, the U.S. government can’t afford, fiscally or politically, to bestow huge gifts on bank shareholders.

Who disagrees with this? Besides shareholders in the banks? What does Santelli think?

Speaking for me only