House Committee Endorses Less Restrictive "Bonus" Measure

The House of Representatives Financial Services Committee has endorsed a measure that would give the Treasury Department the authority to determine whether the public should become outraged over executive bonuses for TARP participants. Actually, the measure would give the Treasury Department the discretion to say whether executive compensation at bailed out banks was too excessive. But I suppose public (and media) outrage would closely track the Treasury Department's position on the issue. Although the measure would give the Treasury Department the authority to determine when executive compensation has gone too far, earlier this year, officials in the department pressured Senator Christopher Dodd to remove language from a provision he sponsored that would have prohibited highly controversial bonus payments made by AIG.

The measure would not apply to participants in the proposed trillion-dollar "toxic assets" purchase plan. Recently, White House economic advisor Christina Romer described potential investors in the plan as the "good guys," and media outlets reported that prospective investors had already warned the government not to limit their ability to compensate executives.

Committee Chair Barney Frank, reflecting arguments from the Obama administration, says that flexibility would encourage wider participation in the program. I guess this means that executives will not be subjected to random drug tests, as some states are considering imposing upon recipients of welfare and unemployment benefits.

Fundamentals of the Economy Are Sound -- Really?

During the presidential campaign, Senator John McCain said that the fundamentals of the economy were sound. This sent the media and Obama into orbit. Today and earlier this week, however, President Obama and Christina Romer -- Chair of Obama's Council of Economic Advisors -- basically said the same thing. Jake Tapper's Political Punch blog has more details.

Romer, for example said:

"Of course, the fundamentals are sound," Romer said on Meet the Press, "in the sense that the American workers are sound. We have a good capital stock, we have good technology. We know that, temporarily, we're in a mess, right? We have seen huge job loss, we've seen very large falls in GDP. Certainly in the short run, we're in a bad situation."

But Obama beat down McCain as being "out of touch" for making the same comment:

"We just woke up to news of financial disaster, and this morning he said that the fundamentals of the economy are still strong," Obama said on September 15 in Grand Junction, Colo. "Sen. McCain - what economy are you talking about? "What’s more fundamental than the ability to find a job that pays the bills and can raise a family? What’s more fundamental than knowing that your life savings is secure, and that you can retire with dignity? What’s more fundamental than knowing that you’ll have a roof over your head at the end of the day?"

And earlier last week, Obama himself said that:

"[I]f we are keeping focused on all the fundamentally sound aspects of our economy, all the outstanding companies, workers, all the innovation and dynamism in this economy, then we're going to get through this. And I'm very confident about that."

Even Huffington Post, which beat up McCain for saying the fundamentals of the economy were sound last September, has published an article showing the striking similarities between Romer's and McCain's statements. Since the time McCain made his comments, the stock market has plunged, unemployment has soared, foreclosures have climbed to record highs, and GDP is in free fall. But now, the fundamentals of the economy are sound when they were not last Fall. Amazing stuff.

Check out this "just posted" item: Sincere or False Outrage? The Obama Administration Smacks Down AIG

Obama Might Abandon Campaign Promise on Taxes, Names Economic Team; Plus: Rubinomics and Citigroup

Obama Names Economic Team
Although the rumor mill had already leaked the information, Obama named his economic policy team today. Tim Geithner will head the Department of Treasury, while his mentor Larry Summers will serve as the Director of the National Economic Council. Christina Romer will head the Council of Economic Advisors.

Source: CBS News

Rubinomics?
Members of the Democratic Wing of the Democratic Party are already up in arms over some of Obama's staffing decisions. Today's New York Times adds more coals to the fire in an article that links Obama's economic team with Robert Rubin, who served as Secretary of Treasury to Bill Clinton. Liberals and progressives blame "Rubinomics" for free trade and deregulation, which they argue caused job losses and the current credit crisis. The article states that:

The president-elect’s choices for his top economic advisers — Timothy F.
Geithner as Treasury secretary, Lawrence H. Summers as senior White House
economics adviser and Peter R. Orszag as budget director — are past protégés of
Mr. Rubin, who held two of those jobs under President Bill Clinton. Even
the headhunters for Mr. Obama have Rubin ties: Michael Froman, Mr. Rubin’s chief
of staff in the Treasury Department who followed him to Citigroup, and James
Rubin, Mr. Rubin’s son.

All three advisers — whom Mr. Obama will officially name on Monday and
Tuesday — have been followers of the economic formula that came to be called
Rubinomics: balanced budgets, free trade and financial deregulation, a
combination that was credited with fueling the prosperity of the 1990s [Editor:
And the recession of the 2000s].

Source: New York Times

Speaking of Rubin: Citigroup Gets Largest Bailout Package to Date
Citigroup, the troubled financial conglomerate where Rubin serves as a Director, will receive the largest federal bailout of any financial institution to date during the present credit crisis. Under the plan, the government will give Citigroup at $20 billion cash infusion and insure losses on the bank's $300 billion portfolio of bad debt -- largely from risky mortgage instruments. Geithner helped negotiate the bailout pursuant to his role as Chair of the Federal Reserve Bank of New York.

Source: Los Angeles Times

Obama: "No New Taxes"
Taxation became a major debate issue during the general-election campaign. McCain promised to cut taxes for the "middle class," but he also said he would maintain Bush's controversial tax cuts for high-income earners. Obama, by contrast, promised to cut taxes for the middle class, but raise taxes on upper-income earners in order to fund his social programs and to prevent an explosion in the deficit. Many economic experts argued that both candidates' plans (which involved higher spending and fewer taxes) would increase the deficit. McCain's plan, however, would cause greater injury to the deficit because it would not involve any tax increases (as would Obama's).

Now, less than one month after the election, it seems that Obama's tax plan suddenly looks like McCain's. According to Reuters, Obama's team is now considering abandoning its plan to impose new tax increases due to the poor state of the economy. Wasn't the economy bad a month ago?

Source: Reuters