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Think Progress

March 23, 2009

by Faiz Shakir, Amanda Terkel, Satyam Khanna, Matt Corley, Benjamin Armbruster, Ali Frick, and Ryan Powers

ECONOMY

A Culture Of Excess

Last week, in a revelation that produced a surge of populism in Washington and on Main Street, bailed-out insurance firm AIG revealed that it is still planning to pay at least $165 million in bonuses to top executives, many of whom helped bring "the company to the brink of collapse last year." In response, President Obama said he was "stunned" by the bonuses, adding, "These financial industries are holding us hostage." The House voted 328-93 to impose a 90 percent tax on bonuses paid by firms that received more than $5 billion in federal assistance. Despite the dire conditions of the economy, Wall Street excess is still rampant. ABC reports today that bailed-out bank JPMorgan Chase, which received $25 billion in TARP funds, "is going ahead with a $138 million plan to buy two new luxury corporate jets" and build "the premiere corporate aircraft hangar on the eastern seaboard" to house them. The revelation comes just as Treasury Secretary Tim Geithner is expected to announce a new financial rescue plan for the nation's ailing banks, as well as new controls on executive pay. Wall Street, however, has hinted that it may oppose the administration's attempts to rein in its culture of excess.

THE NEW PLAN: Today, the Obama administration is announcing a plan to increase liquidity and the flow of credit in the financial system. As expected, the proposal will create a "Public-Private Investment Program," which "will set up funds to provide a market for the legacy loans and securities that currently burden the financial system," as Geithner explained. The Treasury Department will provide financing for private investors to purchase mortgage-backed and other securities, "help[ing] us get toxic assets off banks' balance sheets," White House economic adviser Christina Romer explained yesterday. But as the Wonk Room's Pat Garofalo noted, "these details officially show that Geithner is hinging the rescue plan on the assumption that toxic assets have an inherent economic value and are not, as many analysts believe, relatively worthless." Indeed, the recovery rates on some of the junk have been as low as 5 percent to 35-40 cents to the dollar. Arguing that the Geithner proposal is reminiscent of Bush administration ideas, economist Paul Krugman said yesterday, "If we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved."

CLINGING TO OLD WAYS: As part of its reform of the financial system, the Obama administration is also expected to call for increased oversight of executive pay, imposing "greater requirements on company boards to tie executive compensation more closely to corporate performance." Wall Street is pushing back against the administration's bank rescue plan -- which is contingent upon private investors buying the assets -- because of pay limits. The New York Times reports that several Wall Street executives "have told administration officials that they would participate only if the government guaranteed that it would not set compensation limits on the firms, according to people briefed on the conversations." Some want to avoid the public eye. The "chief executive of a major investment firm" told the Times that the "deal is good, but it's not worth it if I'm buying myself into a retroactive tax or a Congressional hearing." Main Street, however, has come to a clear conclusion about executive excess. CBS News reports today that 65 percent of people polled "said companies receiving federal bailout money should award absolutely no bonuses," and "only 6 percent said companies on federal life support should be able to hand out bonuses to whomever they chose."

HIGH-FLYING CEOs: JPMorgan's plan for new private jets includes "nearly $120 million for two Gulfstream 650 planes and $18 million for a lavish renovation of a hangar at the Westchester Airport" outside Manhattan. This hangar will be built with reclaimed wood and quarry tile and will feature a "vegetated roof garden." The type of plan is "described as the 'fastest,' 'widest' and 'most comfortable' private jet ever with superior cabin amenities, an optional stateroom, and 12 interior designs to choose from." As The Progress Report reported last month, seven out of eight bailed-out bank CEOs said in a House hearing that their companies still "own or lease" private planes. One of those confirming that he still had a private jet was JPMorgan CEO Jamie Dimon, who also said he was still taking home a $1 million salary. 

UNDER THE RADAR

CLIMATE -- WASHINGTON POST PUBLISHES SCIENCE PROGRESS EDITOR CHRIS MOONEY'S RESPONSE TO GEORGE WILL:  In a February column for the Washington Post, columnist George Will attacked the reality of climate change by "twisting scientific evidence to deny global warming." Critics quickly noted that many of Will's assertions were factually incorrect. But the Post's editorial page stuck behind Will, refusing to issue a correction while claiming that his falsehoods were simply "inferences from data that most scientists reject." This past Saturday, more than a month after Will's column ran, the Post published a response from Will's critics. In an op-ed, Science Progress contributing editor Chris Mooney explained the deliberate lies about the science and the organizations cited in Will's column, saying that Will's argument about global cooling was based on "sleight of hand" and "cherry-picking misleading bits of information." Noting that "partisans of this issue often wield vastly different facts and sometimes seem to even live in different realities," Mooney wrote that "perhaps the only hope involves taking a stand for a breed of journalism and commentary that is not permitted to simply say anything; that is constrained by standards of evidence, rigor and reproducibility that are similar to the canons of modern science itself." On the same day, the Post also published a letter to the editor from the World Meteorological Organization, saying that Will's column was a "misinterpretation" of the organization's data. Climate Progress' Joe Romm called the Post's decision to publish Mooney's op-ed and the WMO's letter an attempt "to restore some of its lost reputation as a credible source of information to the public."

CONGRESS -- CONSERVATIVE LAWMAKERS WHO VOTED AGAINST OMNIBUS TAKE CREDIT FOR LOCAL PROJECTS: Many of the same lawmakers who railed against the FY2009 omnibus are now taking credit for the local projects the bill funded in their districts, the Wall Street Journal noted. Rep. Pete Hoekstra (R-MI) slammed the omnibus as wasteful spending, before putting out a press release touting a local harbor project the bill would fund. Similarly, Rep. Mario Diaz-Balart (R-FL) voted against the omnibus but then declared he was "proud to have secured these federal funds" for his district. Both insisted to the Journal there was no hypocrisy in their actions. "'Not to be rude, but it's one of the dumbest things,' Mr. Hoekstra said of the notion that there is a contradiction. ... 'I don't see any inconsistency at all.'" Diaz-Balart agreed, repeating, "I am very proud of" the local earmarks he put in the bill. Spending hypocrisy is nothing new for these two lawmakers. During the recovery package fight, Hoekstra attacked President Obama's plan as a "spending spree." Three days later, however, he touted the plan's "generous" subsidies for new home-buyers. Diaz-Balart voted against the stimulus because "it's not going to help the economy." Two days later, he signed a letter asking for immediate access to the stimulus cash for Florida, calling the funding "critical" and "vital."

WORKERS' RIGHTS -- COMPROMISE PROPOSAL ON FREE CHOICE ACT CRITICIZED AS WRITTEN 'BY CEOs FOR CEOs': The Wall Street Journal reported over the weekend that a coalition led by Costco Wholesale Corp., Starbucks Corp., and Whole Foods Market Inc. were seeking to compromise with union groups to support a modified version of the Employee Free Choice Act. The compromise was reported to have allowed a union to be formed if 70 percent -- instead of the current bill's 50 percent proposal -- sign a card favoring unionization. The president of the National Right to Work Committee, an anti-union group, responded forcefully, saying in a statement, "These huge companies are apparently willing to sell out hundreds of thousands of small ones under the guise of making some phony and misguided compromise with Big Labor." Today, however, news reports indicate that rumors of a compromise on the majority sign-up provision were inaccurate. Indeed, The Hill reports that the compromise offered in the coalition's "declaration of principles" drops "two of EFCA's main provisions," including the ability to form a union through signing a card. The "measure that would allow workers to bypass secret ballot elections to form a union if a majority of them sign authorization cards stating their intention to organize...is not in the coalition's statement of principles." Instead, "there is a guarantee for a secret ballot in a union election but voting would have to happen in a fixed period of time once workers wanted to certify their union." Additionally, "the provision for the government to appoint an arbitrator if workers and management cannot negotiate a contract within 120 days is removed." Reps. George Miller (D-CA) and Tom Harkin (D-IA) said in a joint statement, "This proposal is unacceptable. It was written by CEOs for CEOs."


THINK FAST

Nobel Prize-winning economist Paul Krugman writes today that, if reports leaked about Geithner's bank rescue plan are correct, then he "has persuaded President Obama to recycle Bush administration policy -- specifically, the 'cash for trash' plan proposed, then abandoned, six months ago by then-Treasury Secretary Henry Paulson." "This is more than disappointing. In fact, it fills me with a sense of despair," he said. 

Foreign firms and governments are increasing their lobbying efforts in Washington and state capitals, hoping to sell "their expertise in clean energy, high-speed transit and other technologies that under gird key aspects of President Obama's stimulus efforts." These firms, however, are "proceeding cautiously for fear of stoking nationalistic objections from U.S. lawmakers and their constituents."

Former DNC Chairman Howard Dean has been named a regular CNBC commentator. He co-hosted CNBC's "Squawk Box" this morning.

In an interview with 60 Minutes' Steve Kroft, President Obama said, "There's got to be an exit strategy" out of Afghanistan. Saying what was needed "is a comprehensive strategy," Obama said, "There's go to be a sense that this is not perpetual drift."

Also in the interview, President Obama "expressed doubt about the constitutionality of a House bill that would impose heavy new taxes on certain Wall Street bonuses, clouding the measure's future." "[Y]ou don't want to be passing laws that are just targeting a handful of individuals," Obama said. "I think you certainly don't want to use the tax code to punish people."

On Friday, "[t]wo dozen black lawmakers angrily stalked out of the Georgia House...amid assertions that a decision by white Republican leaders to delay passage of a resolution honoring President Obama had racist overtones." Republican lawmakers objected to the resolution's wording, which said Obama has an "unimpeachable reputation for integrity, vision and passion for public service."

President Obama will speak about the energy portion of his budget at the White House today, highlighting research and development in clean energy. Aides to Obama say that while the administration will work with Congress on the budget, "energy independence is not subject to wheeling and dealing."

The AP writes that under Hillary Clinton, the State Department is "embracing new media." In less than three months, "Clinton's Web efforts already have outpaced those of her predecessors," including a revamped website and blog, an "ask the Secretary" column, Twitter feed, and YouTube channel.

And finally: For the record, Michelle Obama is not pregnant. Lately, there have been rumors swirling on the Internet that there may soon be another Obama running around the White House. But in a new interview for O Magazine, Oprah says to the First Lady, "Well, you look better than ever - despite the rumors that you've got a baby bump." Laughing, Obama replies, "I know -- I was like, 'Baby bump? As hard as I work on my abs?!'" She adds that she's not pregnant and "not planning on it."



GOOD NEWS

After years of misinformation on the Employee Free Choice Act, the Wall Street Journal editorial board finally conceded that it "doesn't remove the secret ballot option."

BLOG WATCH

THINK PROGRESS: Weekly Standard editor Bill Kristol complains that Obama's message to Iran is "weak and embarrassing." 

WONK ROOM: President Obama's foreign policy: Public diplomacy is front and center.

YGLESIAS: The potential negative consequences of bombing Iran's nuclear facilities.

GRASPING REALITY WITH BOTH HANDS: Answering frequently asked questions about Treasury Secretary Tim Geithner's financial rescue plan.

STATE WATCH

MASSACHUSETTS: Gov. Deval Patrick (D) will "unveil a series of proposed reforms designed to close loopholes in the state pension system."

TEXAS: "The Texas Board of Education will vote this week on a new science curriculum designed to challenge the guiding principle of evolution."

WISCONSIN: "State officials are seeking federal stimulus money to pay the full $519 million cost of a proposed 110-mph Milwaukee-to-Madison passenger train line."

DAILY GRILL

"[T]he danger [is] that everything will be presented from one political viewpoint...that the media that confront us are going to be more partisan."
-- Fox News's Brit Hume, 03/19/09

VERSUS

"[Thanks] for the tremendous amount of material that the [conservative ] Media Research Center provided me for so many years when I was anchoring Special Report...
we certainly made tremendous use of it."
-- Hume, 03/19/09

INTERNSHIPS

The research team that brings you The Progress Report and ThinkProgress.org needs summer interns! Click here for more information.


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