The Washington Post, alas, gets this editorial wrong in the very first sentence:

NO ONE LIKES to be the bearer of bad news — especially when it could threaten your multibillion-dollar health-care reform bill.

Come, I will conceal nothing from you: considering the amount of time that the Right’s bloggers, pundits, and legislators have spent explaining why the Democrats in Congress needed to institute a Stop spending money we don’t have, you idiots policy, well.  We do live here, too, so our liking is hardly unalloyed - but we did say that this wasn’t going to work*.  Moving on:

And so the Obama administration did not exactly rush to publish yesterday’s required mid-session update to its federal budget estimates of last February. Still, once the numbers finally emerged in the dog days of August, they retained the power to stun: Instead of a cumulative $7.1 trillion deficit over the next decade, the White House now projects a $9 trillion deficit. These figures imply average annual budget deficits greater than 4 percent of gross domestic product through fiscal 2019, a rate of debt accumulation faster than projected GDP growth. This is not a sustainable fiscal path.

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From the diaries by Erick.

H/T to Michelle Malkin.

Reuters is reporting that Kenneth Feinberg, the Obama Adminstrations “Pay Czar” will be reviewing compensation contracts for company officials and may “claw back” much of what has been or will be paid.

Particularly concerning is this, from the second page of the article:

Feinberg said the law requires him to take market forces into account, but also to consider performance and past deals between a company and an employee.

“The statute provides these guideposts, but the statute ultimately says I have discretion to decide what it is that these people should make and that my determination will be final,” Feinberg said.

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Congressman Paul Ryan, the senior Republican on the House Budget Committe, today laid out the problems with the House Democrat Budget Resolution:

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Today, Rep. Barney Frank (D-MA) and Congressional Democrats have taken their false outrage over AIG bonuses a step farther by introducing a plan to limit pay for employees who work for TARP recipients. The entire controversy over executive pay demonstrates why the government has no business interjecting itself into the private sector. Washington has gleefully jumped at the opportunity to rack up political points over an episode that involves a small fraction of the total taxpayer money wasted during the bailout spree, but unfortunately has left the larger problem unaddressed.

As political outrage over bonuses continues to spawn more bad legislation, we can see the precise folly of mixing government intervention with the free market. Washington has done enough to damage the private sector by injecting itself into businesses with no discernible exit strategy. Now, Democrats are pushing legislation that would do irreparable harm to already-struggling recovery efforts by driving away the folks who are needed to repair our financial sector. Government bailouts have led us down the path of institutionalized tyranny. And, all signs out of the White House and the Speaker’s office point to more bailouts and more wasted taxpayer money.

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Senator Dodd, there’s been a lot of attention recently to your relationship with AIG. You’re the top Congressional recipient of their political donations, they have a major presence in your state, and you sponsored a provision that allowed them to deliver bonuses to many of your constituents. And yet even as you’ve sworn up and down that you never wanted to protect AIG, and you have no reason to wish to do so, we learn that your wife served on the board of - and was compensated by - an AIG subsidiary?

From 2001-2004, Jackie Clegg Dodd served as an “outside” director of IPC Holdings, Ltd., a Bermuda-based company controlled by AIG. IPC, which provides property casualty catastrophe insurance coverage, was formed in 1993 and currently has a market cap of $1.4 billion and trades on the NASDAQ under the ticker symbol IPCR. In 2001, in addition to a public offering of 15 million shares of stock that raised $380 million, IPC raised more than $109 million through a simultaneous private placement sale of 5.6 million shares of stock to AIG - giving AIG a 20% stake in IPC. (AIG sold its 13.397 million shares in IPC in August, 2006.)

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We at Red State have pointed out several times that while Chris Dodd agreed to insert an amendment into the stimulus bill to protect AIG bonuses, he was not in position to do so. Chris Dodd was not a Member of the conference committee that drafted the final version of the bill - the only one that had protection for AIG. The Democrats on the conference committee locked the Republicans out of the process and wrote the bill themselves. No Republican supported the conference report; no Republican signed it (look on the final page of the conference report here).

The Democrat conferees were Daniel Inouye, Max Baucus, Harry Reid, Dave Obey, Charlie Rangel, and Henry Waxman. One (or more) of them allowed Dodd to make the change.

So who was it?

Harry Reid needs to talk about his role in this. And so should Daniel Inouye, Max Baucus, Dave Obey, Charlie Rangel, and Henry Waxman. Each was responsible for the contents of the bill that the six of them drafted together.

When the House passed the Obama-Reid-Pelosi debt spending plan - and the carveout for AIG bonuses - Democrats allowed a scant few hours for review of the 1,000 page bill before the vote. Some honest Members of Congress admitted they had not read the bill. Nevada’s Dina Titus however, claimed to have done so:

House Democrats voted on the ’stimulus’ bill just a few hours after they drafted the text (without input from Republicans). Did Representative Titus really go over the entire text as she claimed, or was she simply too embarrassed to acknowledge that she was voting on something she hadn’t read? In either case, she clearly felt she knew enough to vote for the bill, since the House had been talking about it ‘for a long time’ - about 3 or 4 weeks, actually.

Did Titus really know what she was voting on, or was she shirking the first and most basic part of her job? It’s time for all the Democrats who voted for this bill to answer that question.

Today Treasury Secretary Geithner gave an interview to CNN in an attempt to head off further inquiries into the Democrats’ handling of the AIG mess. What he admits is stunning:

Velshi: One of the issues CNN and other news organizations have reported since late January, that AIG was going to pay about $450 million to about 400 employees of the AIG financial productions unit, which is really at the heart of AIG’s problems, an otherwise healthy company.

There is some dispute as to who knew when what. AIG’s CEO said that you might have known about this earlier than you did. When did you learn about this, and what did you learn?

Geithner: I was informed by my staff of the full scale of these specific things on Tuesday, March 10th. And as soon as I heard about the full scale of these things, we moved very actively to explore every possible avenue — legal avenue — to address this problem, to make sure that, again, the assistance we were providing was not going to unduly benefit these people.

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I don’t think that Jim DeMint necessarily has Barack Obama’s political fortunes in mind when he advises him to fire Tim Geithner, but it’s good advice anyway.

In Washington D.C., it’s not hard to predict what usually happens to a politician in Geithner’s place. Several Republicans have called for him to resign; more will. The press will begin to ask many Democrats what they think. Several of them are clearly not far from calling for a resignation as well; one will before long. That will be the signal that Geithner is near the end of the road.

Obama still has a very ambitious agenda that depends on his Treasury Secretary. There’s health care reform, the budget, cap-and-trade, a resolution for GM and Chrysler, and more efforts to stabilize banks. Administration officials are still saying that Congress is likely to need to approve more money for that bailout. That ship has probably already sailed, but at the very least it’s impossible to imagine Geithner getting it approved. The sooner Obama cuts his losses, the better.

The House is debating HR 1586, a bill that would tax bonuses given to employees of bailed out businesses.  The bill would tax “90 percent of the TARP bonus received by the taxpayer.”  The TARP recipient’s employer must have received the money from “the Emergency Economic Stabilization Act of 2008″ (the TARP bailout), “the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation”, “members of the same affiliated group” (units of the TARP recipients, FNMA and FHLM monies), and affiliated partnerships.  Conservatives in the House and Senate need to use this debate as an opportunity to debate how this provision was placed in the Obama so called Stimulus bill and forbidding future bailouts.

This effort in the House and Senate to tax bonuses is not much more than a cover your backside vote to protect the Obama Administration and liberals in Congress who requested, through Treasury, that the AIG Bonus Protection Amendment be put in the Stimulus.  If conservatives in the Congress want to show some leadership, they need to use the bonus debate to fight the further nationalization of private enterprise.

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A friend informs me that all but 8 House Democrats just voted against a measure to require the Obama administration to do everything legally possible to compel AIG to return to the taxpayers the controversial bonuses approved by Secretary Geithner. The bill is described here by its sponsor, Congressman Paulsen:

This is the text of the bill:

Section 1: The Secretary of the Treasury shall, notwithstanding any other provision of law, implement a plan within the next two weeks to recoup or stay the payment of AIG bonuses.

Section 2: No additional funds may be provided to AIG until the bonuses are returned.

Section 3: Any future bonus payments, of any kind, by TARP fund recipients who have not within two weeks of enactment of the bill repaid the government in full, must be approved in advance by Treasury.

Section 4: Any future contractual obligations to make bonus payments of any kind entered into by TARP fund recipients who have not within two weeks of enactment of the bill repaid the government in full must be approved in advance by Treasury.

House GOP Whip Cantor has a list of the Democrats who voted to protect AIG here. Why would they block a bill that requires the Treasury to do precisely what they claim to want?

Today I had the opportunity to talk to Congressman Kevin McCarthy when he addressed the Heritage Foundation’s conservative blogger briefing. I asked McCarthy how House Democrats view Tim Geithner - based on his conversations with his colleagues across the aisle.

McCarthy said that Geithner was in ‘dire straits’ - that he had blown his first impression, came across as the ‘man with the plan’ who had none, and now was getting mocked by Saturday Night Live. The AIG mess would only worsen his situation. As McCarthy pointed out, Geithner needs a strong support team to have a chance to turn things around - but seems unlikely to get one anytime soon. According to McCarthy, that seems to be the view of House Democrats as well.

Is Geithner in ‘dire straits?’ Well, when a manager gets a vote of confidence from the owner, it’s only a matter of time before he’s out:

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Tim Geithner is heading to the Hill this evening to brief House Democrats on the administration’s bank rescue plans. This report seems to come rather suddenly; you can’t help but wonder why it’s suddenly important for Geithner to come to the Hill on just a few hours notice:

U.S. Treasury Secretary Timothy Geithner will brief Democratic members of the U.S. House of Representatives on Monday night on efforts to stabilize the financial sector, party aides said.

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Given the complete collapse in the Stock Market - and Wall Street’s obvious vote of ‘no confidence’ in the new administration, it’s funny to read the plan that Barack Obama laid out for himself just two months ago:

…but the markets are obviously a slightly different situation. Right now, given the sensitivities of the market, I’ve got to pay some attention to market psychology because part of what we have right now is such a loss of trust in both the marketplace and in government that restoring that confidence, restoring that trust is going to be very important. I’m not going to part of watching the crawl at the bottom of an interview. What I will be doing is making sure that I’m communicating with key market participants on a regular basis, again, to explain to them what exactly our plans are and to solicit from them good ideas.

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Only twelve Senators voted against TARP, the Big 3 auto bailout, and the Porkulus boondoggle.

Who were they? (Answer below the fold)

Speaking of which, does anybody else out there have some good trivia? Let’s make this an open thread, with a slight emphasis on brain-expanding question-and-answer in the comments.

My personal favorite subject is ancient history

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Yesterday was his boss’s turn. Today’s it’s Tim Geithner’s.

There are two crises going on, a financial one and an economic one. Yesterday, Obama went to Indiana (a red state that he flipped and needs to suck up to, so they’ll keep going blue), and then to national television, to talk about the economic situation. His message was that the only way to make the economy better is to spend a lot of borrowed money, right now, and it almost doesn’t matter what we spend it on.

The economic crisis is actually rather easy for the President to deal with, on the terms in which he has framed it. He’s not actually interested in returning the US economy to stable, sustainable growth, while repairing the global macro-imbalances which are part of what caused the crisis.

All the President wants to do is to “create or save” 4 million jobs. He already has a disingenuous economic report in hand, published on January 9, which presents a spreadsheet version of an economics-101 case that $800 billion or so in government spending produces 1.5 times that much additional GDP, which by Okun’s law will create or save 4 million jobs. QED.

Whatever happens in the economy, even a return to Great Depression-level unemployment rates, Obama will always be able to say that the situation would have been 4 million jobs worse than it is. His job is all done, except for the PR.

Geithner’s job is just beginning. He has to stabilize the financial system. Success for him is being defined as a return to reasonably-normal levels of private credit formation. He’s going to announce today that he really has no clue how to make that happen.

In a nutshell, Geithner’s problem is that America’s biggest banks aren’t actually dead, they’re just on life support. That constrains his options. Let me explain.

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Bloomberg reports on the news that Treasury Secretary and Tax Cheat Tim Geithner has delayed until tomorrow the announcement of the ‘TARP II’ request. White House Economics Director Summers says that they’ve pushed it off because they don’t want any distractions from the cloture vote today on the Obama-Reid-Pelosi debt spending bill. Summers is right about one thing: if the administration announced today it was getting ready to plow another trillion dollars into the banking system, Senators might not be so eager to spend a trillion more on pork-barrel projects:

President Barack Obama’s struggle to push an economic stimulus bill through Congress may seem easy compared to what he’ll encounter when he returns to Capitol Hill for additional funds to rescue the banking system.

Obama will likely need to ask Congress for more money to recapitalize banks, as much as $1 trillion on top of the roughly $300 billion remaining in the current Troubled Asset Relief Program, according to an estimate by former Federal Reserve economist Ward McCarthy. That will be an even tougher sell for the new president than the stimulus plan, which is headed for a Senate vote this week after passing the House with no Republican support…

Geithner’s speech has been pushed back one day to Feb. 10 to avoid distracting attention from the economic-stimulus bill, White House economics director Lawrence Summers said today. That is the same day the Senate is scheduled to vote on the bill.

“There’s a desire to keep the focus right now on the economic recovery program, which is so very, very important,” Summers said today on ABC’s “This Week.”

While Bloomberg cites a figure of $1 trillion, there doesn’t seem to be any real consensus on what Geithner will propose tomorrow. Senator Schumer has previously said that he anticipates the ultimate cost of TARP II may be as much as $3-$4 trillion. Apparently the Obama administration is going to great lengths to make sure Senators have no idea of the TARP request when they vote on the stimulus bill. That doesn’t show much confidence about the public reaction.

Obama promised us openness, and this move is awfully transparent.

Global stock markets are soft across the board as we swing into the first trading day of February. At first glance, this appears to be responsive to the constant drumbeat of terrible economic news, as economies and trade shrink in unison.

The action in the bond markets appears to be somewhat healthier. For several weeks, the theme underneath the surface noise in corporate debt markets has been gradual stabilization. Things are far from normal, but they’re inching along in the right direction. Spreads between corporate debt and government debt have been compressing, and the tone shows that risk tolerance is making a comeback in some sectors.

Here, and in the slightly-improving tenor of the short-term capital markets, you can see the positive impact of the Treasury and the Fed’s heroic stabilization efforts, including the much-maligned TARP.

The government debt market is where the real action is. The yield curve has been neurotically steepening and flattening as participants weigh the broadly offsetting influences on prices for governments: the steadily worsening economic news tends to support prices, and the gargantuan amounts of new issuance push the other way.

I think the friction and noise being generated as markets absorb new supply is the surface phenomenon, and the continuing strong demand for risk-free debt is the deep structure.

Senate Democrats lined up a show panel to testify on the need for a new TARP. The consensus seems to be that Congress will need to come up with at least $600 billion more, with another $600 billion to be printed up by the Federal Reserve:

Noting the $350 billion spent by the government to shore up faltering banks and another $350 billion waiting to be allocated — as well as the $800 billion-plus economic stimulus package — the economists warned that as much as $600 billion more will be required from lawmakers to re-capitalize weakening banks, remove toxic assets from their balance sheets and address the foreclosure crisis. On top of that, the Federal Reserve might have to match that with another $600 billion to cover just the cost of bad assets on banks’ balance sheets. “Until we stabilize the housing market, it’ll be tough to do anything about the [sinking] economy,” said Tim Adams, managing director of The Lindsey Group and a former Treasury undersecretary.

So $1.2 trillion, on top of the $1.1 trillion debt plan being pushed through Congress. And then we have a half-trillion ‘transportation’ bill, a few hundred billion for health care, and a few hundred billion more for the automakers.

Not only is there more spending to come, the ’stimulus’ package is the tip of the iceberg! Right now it looks likely to be about one-third of the total new spending called for Barack Obama — above and beyond the already bloated federal budget.

Barney Frank, Luis Gutierrez, and Danny Davis are all using the TARP program to intervene on behalf of constituent banks and get them aid, even when the individual financial situation of those banks does not justify any grant of aid whatsoever. What’s more: These champions of “progressive” government regulation are also trying to ensure that regulators don’t come calling on their constituent banks.

Money quote:

Politicians’ efforts to intervene on behalf of specific banks during the current crisis recall the savings and loan turmoil of the late 1980s, when members of Congress pressured the government to go easy on struggling thrift institutions. . . .

“This is a disturbing parallel to precisely some of those things that made the savings-and-loan debacle into a political scandal as well as a financial scandal,” said William Black, an associate professor at the University of Missouri-Kansas City, who was a bank regulator in the S&L crisis.

“Most ethical Congress in history,” according to Nancy Pelosi. And these people have gotten more TARP funds released with which to play. If that doesn’t keep one up at night, I don’t know what will.