Insanely Early 2016 Speculation (Hillary Clinton Edition)
Yes, it is insanely early to be speculating about 2016. This, however, is not going to stop me from doing so. In fact, I am somewhat late to this particular party since we've all been seeing a spate of stories about Hillary Clinton in the punditocracy for the past month or so. So, yes, this is going to be another of those articles. If this doesn't interest you, then I strongly advise you stop reading right now and choose some more productive use of your time.
For the rest of us wonks, I have to point out that I've already written about the 2016 election previously, looking at Chris Christie (pre-bridge scandal) way back in November, and more recently laying out what a large Electoral College advantage just about any Democrat is going to enjoy in 2016.
Other than the Electoral College shift, another rather strange dynamic seems to be shaping up between the two dominant American political parties. Democrats and Republicans are reversing their traditional scenarios when it comes to nominating presidential candidates. This tradition even comes with its own bumpersticker slogan to define it: "Democrats fall in love, Republicans fall in line." Democrats, in other words, have a large field to pick from and select the one that everybody likes best, in the end, and then enthusiastically gets behind them for the general election. Republicans, however, pretty much know who is "next in line" for the nomination, and while other candidates may put up a limited fight, everyone knows who the nominee is going to be long before the first primary happens -- after which, Republicans all fall into line behind him, like him or not. But this time around the primary field is going to be wild and wooly over on the Republican side, with nobody being able to convincingly claim to be "next in line" (Rick Santorum or Paul Ryan could come closest to making such a claim, but this is going to be challenged by many others). But over on the Democratic side, there is only one woman standing, at least at this point, and her name is Hillary Rodham Clinton.
Clinton has a great argument for 2016 being "her turn." She is, without a doubt, "next in line" in the Democratic Party. After the closely-fought 2008 primary season, Hillary brought the party together behind Barack Obama, and later accepted a position in his cabinet. She's definitely paid her dues, party-wise. And she's already shown the ability both to raise money and to get millions of people to vote for her. There is nobody else in the Democratic Party with an equivalent claim -- the only one with even a hope of making such a claim is Joe Biden, in fact. But his claim is a fairly weak one.
This was just reflected in a Washington Post poll, which showed Hillary beating all other Democratic contenders by a wider margin than has ever been seen in such early polling. Hillary was at 73 percent support among Democratic voters. Biden was far, far behind in second place, with only a paltry 12 percent. Leading the field by a whopping 61 points is one of the reasons why Hillary's name has been in the news of late. The other reason is that there is a shadow "Draft Hillary" campaign organization which is growing and putting out press releases touting Hillary's so-far-non-existent campaign as being all but inevitable.
Astute watchers of the political scene will note, however, that this is precisely the same argument Hillary was making roughly seven or eight years ago. Hillary was going to be the inevitable candidate for 2008, remember? This got so prevalent people even started talking about a "coronation" rather than a primary season.
Hillary Clinton, quite obviously, remembers all this. Should she run, she will no doubt be on guard against the "inevitable" label. She will present herself as "not taking anyone's vote for granted," and "fighting hard for every vote." She will also, no doubt, not hire the same campaign consultants who told her to just clear the field on Super Tuesday and then not worry about anything after that, because by then she'd be a shoo-in. Hillary knows full well that mistakes were made last time around, and she will be doing everything she can not to repeat them.
Of course, eight years ago few people knew the name "Barack Hussein Obama." Just because Hillary looks inevitable this far out doesn't mean she actually will be when the voting starts. There could be some charismatic up-and-comer lurking within the Democratic Party who will explode onto the political scene and sweep everyone off their feet. It is, after all, insanely early to even be talking about 2016.
My guess, however, is that this time around "Hillary is inevitable" is going to prove correct -- if she runs. I think that there will be a number of Democrats challenging Hillary in the primaries, but that they all will essentially be running to become Hillary's vice president. A number of young candidates (young enough to wait their turn for the big race until 2024, that is) will politely make their own case, without beating up on Hillary too viciously. There may be a challenge from the left, but Hillary can defuse any such candidate by shaping her own positions in a more populist manner than her husband (and Barack Obama, for that matter) did.
Hillary, if she runs, is going to be as exciting a candidate as Obama was. If elected, she would be the first woman to hold the office, of course, which is historic. She would also be the first First Lady to ever rise to the job as well. Women voters will be exuberant about seeing Hillary elected. The only way Republicans could even hope to counter this would be if they nominated a female candidate as well, but at this point that seems somewhat of a long shot.
There's one question that needs a bit more attention, though: will Hillary actually run? Most people make the assumption that this is a foregone conclusion, but I'm not entirely convinced. She sure does have the "fire in the belly" to run, she's already proven that. She wants the job. She really really wants the job, in fact. She is convinced of her ability to do the job, she thinks she'd do a good job, and she thinks she'd be the best person for the job. None of that is in question. Most Democrats would agree with at least two out of those three. But will she still be able to do the job?
Hillary Clinton, if elected, would be the second-oldest president in American history. Ronald Reagan was less than a month from being 70 years old when he was first sworn into office, in 1981. Hillary would be a few months older than 69, if inaugurated. As Reagan showed, age doesn't preclude winning elections (he was four years older for his second term, remember). But it would indeed be an issue in the campaign, and a much bigger issue than some might think. The entire Republican field of candidates is decidedly youthful-looking when stacked up against Hillary. The Republican campaign will take on the flavor of "young ideas" versus "old, stale, discredited thinking." While Hillary will be an exciting candidate for women, it remains to be seen if she'll turn out the youth vote as successfully as Obama did.
Of course, "age" is another way of saying "health." Americans want to elect someone who will be reliably healthy while in office. Republicans can be expected to suggest that electing Hillary would be a risk. The health scare she had right before leaving office will be brought up either suggestively or perhaps openly, to convince voters that the (younger, healthier) Republican is a better choice. Campaigning for president is exhaustive, and so Republicans will say that Hillary just isn't up to the challenge.
This will be tough for Hillary to get around, but by being an example of an energetic politician out on the campaign trail, she can work to defuse such worries. She will also be all-but-guaranteed to choose a vice presidential candidate much younger than she is, to balance out the ticket.
As for Hillary's experience, good and bad, most of it is going to be old news to just about everybody. She inoculated herself against most of it in the 2008 run, meaning nobody's going to pay much attention to opposition research from her days in Arkansas or by Bill's side in the White House this time around. The public has already formed their opinion -- good or bad -- of her earlier days, to put this another way. The only new negatives for her will stem from her term as Secretary of State, and even these have been pretty well hashed-out in the press already. The biggest two negatives from this period are that she didn't accomplish much else as Secretary of State other than flying around the world a lot, and (of course) Benghazi. Hillary will counter the first with a list of accomplishments most have forgotten, and the second by pointing out that only conspiracy theorists (and Fox News) are convinced that Hillary had anything to do with Benghazi.
Hillary Clinton may not be inevitable as the Democratic nominee for president in 2016, but she certainly is formidable, even this early. Barring any health problems, and after she writes a book and enjoys a hugely-successful book tour, my guess is that she is going to toss her bonnet in the ring. The Democratic field won't be completely cleared for her, but in the end she will hire much more realistic campaign advisors and run a much more populist campaign, and she will be the odds-on favorite for the entire primary race. Hillary has the best chance of sweeping the primaries, as Democrats fall into line behind her. She is much more comfortable and much more forceful a speaker than she was when she ran in 2008, and she will be a very tough and savvy politician throughout the entire race.
However, if she has any health incidents while campaigning, then the entire race could be blown wide open. If this happens early enough, Hillary may be eclipsed by a Democrat who looks a lot better than Hillary giving speeches from a hospital bed. But if it happens in the general election itself, it could be catastrophic for the Democrats' chances of holding onto the White House -- especially if the Republican candidate is hale and hearty and young.
Like a sports star who is getting along in years, this will be the Democrats' big gamble with Hillary. Does Hillary have one more "big game" in her? If she stays healthy, then there is nobody who has more experience on the presidential campaign trail than Hillary. If she is never put on the disabled list, then she has an excellent shot of sweeping the general election as well as the primaries. She would clearly be the best candidate for the Democrats to choose, and she already polls well in front of all the possible Republican challengers. If she picks up a large "crossover" vote from Republican women, Hillary Clinton might even win an enormous landslide in the Electoral College. Before she even announces, she is already the clear frontrunner -- and my prediction is that she will remain in the front of the pack for the entire election season. As long as she stays healthy.
-- Chris Weigant
Cross-posted at The Huffington Post
Follow Chris on Twitter: @ChrisWeigant
I would have expected Elizabeth Warren to be ahead of Joe Biden as the other Democrat being talked about.
dsws -
Warren only pulled 8%. But then, she doesn't have the name recognition Biden and Hillary do...
-CW
dsws -
Probably should've provided this link in the article:
http://www.washingtonpost.com/blogs/the-fix/wp/2014/01/30/hillary-clinton-is-the-biggest-frontrunner-for-the-democratic-presidential-nomination-ever-yes-ever/
-CW
dsws,
I would have expected Elizabeth Warren to be ahead of Joe Biden as the other Democrat being talked about.
Yes, and, I expect that you're not the only person to have expected that. Despite the fact that Elizabeth Warren probably still believes that the AIG fiasco could have been better handled through a simple bankruptcy restructuring. She was definitely wrong about that!
On top of that, she was infinitely disrespectful to Secretary Geithner, on more than one occasion. Which I expect garnered her a few more feathers for her populist cap, US economy be damned.
Biden has a greater understanding of these matters and a far better demeanor. Ahem. Unfortunately, those qualities arn't worth much in a presidential campaign.
LizM -
Despite what the wonkily-aware community knows, Elizabeth Warren is simply not known to the average American. Joe Biden is a bit more known, but you'd be amazed how many Americans can't name our own veep when asked.
Opinion polls this far out (even as much as a single year before the election, in fact) are nothing more than "name recognition" measurements, really.
Hillary, love her or hate her, is known to just about everybody.
-CW
Chris,
Hey, I'm amazed that there exists a poll that has Biden in the double digits.
Heh.
:(
Elizabeth Warren is simply not known to the average American.
And that's relevant, how?
The primary campaign begins in nine months. Actual primary elections and caucuses haven't even been scheduled. The average American barely makes it to the polls in the general election.
If they took a poll of likely primary voters, that would be somewhat relevant at least.
For the rest of us wonks, I have to point out that I've already written about the 2016 election previously, looking at Chris Christie (pre-bridge scandal) way back in November, and more recently laying out what a large Electoral College advantage just about any Democrat is going to enjoy in 2016.
But... But... But... I thought the Left just HATED the Electoral College...
Ahhhhh... The Left only hates the Electoral College when it works against them... I see now.. :D
Clinton has a great argument for 2016 being "her turn." She is, without a doubt, "next in line" in the Democratic Party.
I have a visceral objection to electing our leader based on "their turn".. And that objection, like my entire being, is not based on Right or Left..
We simply should NOT elect our leaders based on some subjective condition such as one has "paid ones dues"...
Hillary knows full well that mistakes were made last time around, and she will be doing everything she can not to repeat them.
"We're not going to make the same mistakes this time around."
"No, no. You are making all NEW mistakes"
-Jurassic Park II
:D
Hillary's biggest problem is going to be Bill...
As we have seen recently, Slick Willy's sexual escapades are still news..
I am not sure that Americans are ready to have a First Slut in the White House.
While the term "First Slut" is crude, I'll grant you, it is (in the case of a Hillary Presidency) imminently more accurate than "First Gentleman" of whatever the hell they would call the husband of a female POTUS..
Michale
Elizabeth (4)
AIG fiasco could have been better handled through a simple bankruptcy restructuring. She was definitely wrong about that!
Could you explain?
Paula,
That's a pretty simple couple of statements. What don't you understand?
Paula,
Or, is it that you disagree and believe that Elizabeth Warren was right about her contention that AIG could have handled through bankruptcy laws?
At the risk of offending people, I really don't want someone who is that old elected president. Can the Dem machine make enough noise for Klobuchar to take the nomination if HRC doesn't run? That would be pretty cool.
The real problem with HRC's age is that even if she doesn't have a problem and gets elected, if she does run into real issues during her first term, then she is a one-term president, for sure. More than 12 years of single party is exceptionally rare, but chances improve if their is an incumbent in that fourth election.
That fourth election is 2020, a redistricting year.
Elizabeth:
There were some pretty intense debates over those issues that are, to some degree, still ongoing. But you express a strong certainty about E. Warren's position and I'm curious why you are so sure that she is/was wrong?
Speak2,
At the risk of offending people, I really don't want someone who is that old elected president.
Oh, I doubt you'll offend anyone here with a statement like that, regardless of our age, energy and fitness level, or knowledge base.
But, speaking very generally, you do expose yourself as someone who might foolishly eliminate extraordinary candidates for the presidency based solely on age.
Are you for term limits, too?
Paula,
She is wrong because a bankruptcy court could not have saved AIG. There is no serious debate about that.
Paula,
She is wrong because a bankruptcy court could not possibly have saved AIG. There is no serious debate about that.
Think about it. You know a thing or two about how a bankruptcy unfolds. Where was the money going to come from if not from the government?
Keep in mind that at the time the US economy was circling the drain, teetering on the edge of the abyss, with all credit essentially frozen.
Elizabeth (15): I think there's plenty of serious debate about that. First, I don't think that Warren recommended "bankruptcy court" blankly -- that is a gross oversimplification. The entire 2008 Paulsen/Geithner bailout approach quite clearly showed that the table was wide open at that point -- meaning any number of combinations of responses could have been selected. But what WAS selected was the approach with the least accountability and the least transparency. Warren was arguing (among other things) for honesty and transparency and accuracy as opposed to the smoke and mirrors approach that was taken.
Paula,
If you think there was a better way to restructure AIG, then you must answer the question about where the money was going to come from.
The process taken was very transparent. In fact, I dare say that no other government program has ever been as transparent at the AIG bailout.
By the way, you should know that the AIG fiasco was handled so adroitly by Geithner that it made quite a handsome profit for American taxpayers.
Paula, you might want to revisit those congressional and oversight panel hearings in which Elizabeth Warren was schooled by Secretary Geithner.
These hearing were quite enlightening, on a number of levels.
I'm afraid, Paula, that you are showing a certain ignorance about the AIG bailout if you insist on describing the process as "smoke and mirrors".
At the risk of changing the subject...
But, since it's a recent topic, I figure...
"What the hell..."
-Doc Brown, BACK TO THE FUTURE
:D
Boehner says no immigration deal until Obama enforces laws
http://www.washingtontimes.com/news/2014/feb/6/boehner-says-no-immigration-deal-until-obama-enfor/
Bout time Boehner proved that he has a pair...
Back to the previous scheduled mayhem... :D
Michale
Elizabeth (18):
I said: " First, I don't think that Warren recommended "bankruptcy court" blankly -- that is a gross oversimplification." It was and you haven't defended that.
We can't relitigate the entirety of this topic here, but here's a good summary of some of the issues re: AIG specifically: http://www.usnews.com/news/blogs/rick-newman/2012/12/11/3-lessons-from-the-aig-bailout
Key paras:
Transparency is vital. Perhaps the most controversial element of the AIG bailout was the discovery in 2009 that $62 billion in taxpayer funds disbursed to AIG ultimately went to big banks that had contracts with AIG, including Goldman Sachs, Merrill Lynch, Bank of America and even a few foreign firms. The transactions were complicated, but the feds essentially redeemed AIG trading partners at 100 cents on the dollar, when those same partners would have gotten a fraction of that amount if AIG had declared bankruptcy. Worse, the government never publicized the pass-through bailouts, creating the horrible impression that Washington was simply funneling taxpayer money to Wall Street, like an inverse Robin Hood.
The rationale for those redemptions may have been logical, because they upheld the integrity of the financial system (or at least what was left of it), as well as the sanctity of legal contracts. But it's hard to imagine a worse way to dispense taxpayer dollars. The fact that it was done with no public notice generated legitimate outrage. If there's ever another such bailout, provisions such as this ought to be vetted at Congressional hearings and approved only if politicians can convincingly explain them to voters.
Also:
The other outrage of the AIG bailout was the plan for AIG to pay $165 million in bonuses to senior executives—including many of the traders who caused the very problem that brought AIG to its knees—after the government had gotten involved. In retrospect, the bailout should have included provisions at the outset that prohibited such bonuses, or financed them from private money, or made them contingent upon the ultimate recovery of the company. As it was, the executives were legally due their bonuses because of past obligations they had already fulfilled. That made taxpayers party to a crazy incentive system and once again created the impression that the U.S. government was rewarding outlandish behavior.
The irony of the Wall Street bailouts is that they essentially worked, by stabilizing the financial system and setting the stage for the economic recovery we're now in. Without them, we could easily still be mired in a depression, with the unemployment rate well above 10 percent. But the bailouts also severed the trust many Americans have in their government and left the impression that politicians and bankers merely take care of each other, with no regard for the little guy. If there's even another bailout on the scale of AIG, taxpayers need to come first.
Now, this quote asserts that the bailouts worked -- which is NOT the same thing as saying nothing else would have worked and there's plenty of debate re: the repercussions of all the choices made all along the line. He also notes that one of the defenses of the approach taken was that it upheld "the sanctity of contracts", a statement that should inspire anything except a roll of the eyes and a hollow laugh.
or rather, should inspire nothing except a roll of the eyes and a hollow laugh.
Elizabeth [14]
I agree that my "age-ism" might eliminate some extraordinary candidates based solely on age, and if it came down to Wingnut vs HRC, I have no doubt that I would vote and would vote for HRC.
I see my parents, my in-laws, parents of friends, and some older friends of mine in their 70's and the probability that they start experiencing some form of age-related mental declines is far too great for me to be happy about a Prez at those ages.
As for term limits, sticky. I am not firmly in a camp with that one. It is a complex issue. I think, though, that we have seen too many Reps and Sens who doddered through their last terms and really were no longer able to perform their roles with any vigor.
CW-
Not ridiculously early at all, especially when you exhaustively cover the plausible scenarios, which you did.
Just one thing I think you missed. Bill Clinton, a popular former President, shrewd strategist, fund raiser and good ol' boy campaigner. There are obvious downsides to Bill, and the management of Bill in the general election, but not so much when the electoral college leans so strongly Blue, and he'll be he'll be very useful in the primary stage. Hillary's biggest vulnerability is just being the frontrunner so early. Bill can be her surrogate early on, while she lies low, out of politics, popping up now and then to do "good works" of a non controversial nature. I wonder if she can wield hammer, or a paint brush?
Age comparisons between H. Clinton and R. Reagan may be a bit misleading. My mom lives in a retirement complex. There are a ton of 85 year old women there, very few 85 year old men. Women are more durable, on average.
Age may be more of a factor with husband Bill ...highly respected tabloids in the grocery say he only has six months to live! Heh, heh...
So, HC is a strong front runner, but... a lot can happen. What happens if she stumbles? The innate Democratic advantage in 2016 really encourages the 2nd rank to move forward with gusto. Might we see some Republican primary style disunity and bomb throwing? Geeez, it feels strange to say that, but these are strange times!
Paula,
The USA Today article you cite actually makes my point about why Elizabeth Warren was wrong in her assessment, an analysis which was, indeed, a gross oversimplification, given the magnitude of the financial crisis, the global nature of AIG and the obvious time constraints, all of which combined to severely limit the options available to the government.
The actions taken to rescue AIG by the government, thus preventing a catastrophic global financial collapse, were painful but absolutely necessary. I think people today, six years removed from the height of the crisis, forget just how dire the situation was and how globally interconnected AIG was and fail to realize that there was little time to act which led to many of the less than desirable consequences, particularly with regard to some of the actions taken by AIG in the wake of its initial rescue.
It is rather amusing and, frankly, ironic, to see how the AIG rescue is viewed by much of the public as lacking in accountability and transparency. Because, the AIG rescue was motivated solely by what was in the best interests of the American people. If AIG had failed, the consequences would have made the most destructive financial crisis since the Great Depression seem like the proverbial walk in the park with candy floss.
Rather than continue to play Monday morning quarterback and engage in non-serious debate and discussion about how AIG could have been rescued in a more palatable fashion, those of us who reside on Main Street might instead consider thanking the government officials tasked to manage this crisis and show a little appreciation for their herculean efforts to save our collective bacon, so to speak.
By the way, an excellent source for an overall analysis of how the government acted to rescue AIG and, in so doing, save all of us on Main Street, you should have a look at the comprehensive written testimony by Secretary Geithner to the House Committee on Oversight and Government Reform, presented on January 27, 2010.
Unfortunately, I don't have a link for it anymore but I can assure you that it would be well worth your time to look it up. C-span should still have it in its video library and, certainly, the entire hearing, gavel-to-gavel and including the extremely informative Q and A that followed his testimony, was something not to be missed! Well, if you like that sort of thing. Which I do. Ahem.
Speak2,
Well, all I'm saying is that it is always wise to leave your options open. :)
TS,
Age may be more of a factor with husband Bill ...highly respected tabloids in the grocery say he only has six months to live! Heh, heh...
Yea, boffin' the likes of Elizabeth Hurley would age ANY man!! :D
Some guys have all the luck! :D
Michale
Hmmm. This is surprising indeed. The Warren vs. Biden numbers anyways.
I like both.
I like Warren because I think her thinking on the economy is much closer to mine.
I like Biden because of his foreign policy expertise and experience as Veep.
Here's my surprise pick from the Republican side - John Kasich from Ohio declares a run. I don't know whether he could win, but if he did, I think he'd have a good shot at the nomination w/ Christie out of the way.
-David
What about John Huntsman??
Michale
Elizabeth (27): My initial point was that you grossly oversimplified Elizabeth Warren's position re: AIG -- you implied that it was simplistic and stupid and that everyone agrees now that AIG could only have been handled the way it was. You then blow off the legitimate concerns the handling of AIG raised at the time, and since.
But, since "the AIG rescue was motivated solely by what was in the best interests of the American people." -- well, that's all we need to know, right? Well, except that questioning Tim Geithner and others re:TARP was apparently not in the interest of the American people and the fact that Elizabeth Warren did so does not redound to her credit.
Instead, we "Main Streeters" should be thanking our "herculean" heros and moving along in our post-Tarp even-bigger-too-big-to-fail-banks world where all is well and no one should worry about any coming little hiccups.
What about John Huntsman?
I could see him running. I don't think he elicits much excitement from the Republican base though.
Of course all this assumes Jeb Bush doesn't throw his hat into the ring and we get Bush III. Probably the most likely scenario.
-David
Of course all this assumes Jeb Bush doesn't throw his hat into the ring and we get Bush III. Probably the most likely scenario.
Oh be still my beating heart..
It would be worth it to see the Left go into communal cardiac arrest.. :D
Michale
Personally, I would rather have a BUSH in the White House than a Clinton..
Under Bush, at least parents would know that their daughters who are interning are safe...
Michale
I could see him running. I don't think he elicits much excitement from the Republican base though.
I seem to remember many Weigantians going on the record that Huntsman would be a GOP'er that they could actually vote for.
Maybe that chance will present itself, eh? :D
Michale
Paula[32]
That was enlightening.
Paula,
I'm waiting for you to put up or shut up.
Explain to me, like I'm a six-year-old, how the AIG rescue could possibly have been handled any better than it was.
I'm all ears ...
Paula,
The entire 2008 Paulsen/Geithner bailout approach quite clearly showed that the table was wide open at that point -- meaning any number of combinations of responses could have been selected.
Let's see if you can present just one of those "combinations of responses" ...
Elizabeth:
As I have said all along, you have been grossly over-simplifying Elizabeth Warren's position re: AIG and bankruptcy. You have also been insisting the the approach used was a binary choice: the way it was done or nothing.
From her opening statement in the HEARING before the Congressional Oversight Panel, May 26 2010:
http://www.gpo.gov/fdsys/pkg/CHRG-111shrg63515/html/CHRG-111shrg63515.htm
To be clear, I do not mean to suggest that traditional bankruptcy would have been the best or most appropriate choice for AIG. The company was a corporate Frankenstein, a conglomeration of banking and insurance and investment interests that defy regulatory oversight and that would not have fit easily into the existing bankruptcy structure. Its complexity, its systemic significance, and the fragile state of the economy may all arguably have been reasons for unique treatment, but no matter the justification, the fact remains that AIG's rescue broke all the rules and each rule that was broken poses a question that must be answered.
More links coming.
More links coming.
Great.
Let me know when you find one that explains how the AIG rescue could have been better handled.
That's what I'm most interested in hearing from you.
The government’s $182 billion bailout of insurance giant AIG should be seen as the Rosetta Stone for understanding the financial crisis and its costly aftermath. The story of American International Group explains the larger catastrophe not because this was the biggest corporate bailout in history but because AIG’s collapse and subsequent rescue involved nearly all the critical elements, including delusion and deception. These financial dealings are monstrously complicated, but this account focuses on something mere mortals can understand—moral confusion in high places, and the failure of governing institutions to fulfill their obligations to the public.
From: http://www.thenation.com/article/153929/aig-bailout-scandal?page=0,0# August 6, 2010.
I don't have to come up with "just one of those combinations": plenty of far more expert people than I discussed all of this stuff at the time and since.
More coming.
I don't have to come up with "just one of those combinations": plenty of far more expert people than I discussed all of this stuff at the time and since.
Well, if that's how you feel, don't waste your time with any more links that I won't read. I'm interested in your views on this question. If you don't care to provide you own explanation, then we are finished here.
I don't have to come up with "just one of those combinations": plenty of far more expert people than I discussed all of this stuff at the time and since.
Well, if that's how you feel, then don't waste your time with any more links that I won't read. I'm interested in YOUR views on this question. If you don't care to provide your own explanations or answers to my long pending question, then we are finished here.
Paula,
As I have said all along, you have been grossly over-simplifying Elizabeth Warren's position re: AIG and bankruptcy. You have also been insisting the approach used was a binary choice: the way it was done or nothing.
Let me be crystal clear - Elizabeth Warren was advocating bankruptcy as the most efficient way to handle the AIG mess. Clearly, she was dead wrong about that.
To argue for a bankruptcy option - simple or compound - is to ignore a number of facts that prevented that option, not the least of which involved a lack of authority on the part of the US government to dictate such a prescriptive policy.
What I have been insisting on, consistently through this comment thread, is that the AIG rescue, as managed by Geithner, was handled in the best way that was possible at the time, given all of the circumstances that necessarily limited - and limited severely - the options that were available.
Do you have an actual quote from Elizabeth Warren on AIG bankruptcy?
If a firm's creditors demand money it can't pay, it goes into some form of bankruptcy without any intervention by the federal government. Keeping AIG out of bankruptcy is what required action, which in turn required the authority to act. So how did the government not have the authority to let AIG go into bankruptcy? Or are you saying that its authority to bail AIG out would have evaporated if AIG had been involved in bankruptcy proceedings?
dsws,
The problem is that there is no way in hell that the government was going to let AIG go through bankruptcy - any kind of bankruptcy! - because the consequences for that would have been global and catastrophic. End of story.
dsws,
Sorry ... I hit the Submit button too soon ...
Remember, time was of the essence here and the various creditors of AIG - namely the big banks - would have litigated for years over terms of a bankruptcy but, unfortunately, AIG needed to be rescued and rescued FAST!!!
As Secretary Geithner explained it, there were no legal tools available to deal with a failure of a global entity like AIG as the FDIC could deal with failed banks; in the absence of government assistance, AIG would have had to file for bankruptcy and default in trillions of dollars worth of derivatives and other substantial debts ; there simply was no process in place for an orderly unwinding of AIG and no time to negotiate bankruptcy which might have taken years to settle with global creditors, let alone those banks in the US.
dsws,
I don't have a quote for Elizabeth Warren's stance on bankruptcy ... I just have a very vivid memory of Geithner trying desperately to explain to her why bankruptcy was not a viable option for AIG, given the magnitude of its debt and default on trillions of dollars worth of complex derivatives, and the global nature of its business.
If you read the transcript from the hearings referenced in my comment (40) you see a horrendous situation wherein regulators claimed a lack of authority in some cases; lack of clear laws; a lack of any plan B.'s should there not be any kind of private-sector solution, so that when, in the case of AIG, JPMorgan Chase and Goldman Sachs declined to pony up the ONLY option was for the Feds to step in, and there were no guidelines at that point because the stakes were so astronomically high -- no previous possible corporate failure could compare! All that "complexity" that AIG defenders claim is the reason we had only one choice. We were in the too-big-to-fail situation (that we still are in).
And that's really what the debate was and is all about: how did we get there and how do we get out?
One of the major problems uncovered by the 2008 meltdown was the incredibly incestuous relationship that existed between the companies, the ratings agencies and the various governmental bodies involved. People were moving continuously from one to the next, which, created a kind of bubble where people had the same blindspots, as well as an overmastering compulsion to protect these banks from the consequences of their own actions. The ratings agencies have since been shown to have been completely co-opted by the banks -- they utterly failed at their jobs.
All of this was the culmination of years of buildup on two fronts: the removal of Glass Steagall, and the financialization of our economy. Those are both very large topics in themselves which I will not enter into now.
But the point of the hearings about TARP and all the rest of it was that these problems were systemic and extremely far-reaching. As a member of the public, having been told that the apocalypse was imminent, and at the same time seeing people I knew losing their homes and others losing big chunks of their retirements and having personally had clients go out of business, which meant my own business took a major hit, I felt a pretty strong desire to know what the hell had gone on, what was done about it and how would it be kept from happening in the future.
We are told that TARP was a "success" -- the taxpayers "made a profit". I'm sure that that is, on some level, true. But, oddly, that success, while it has helped a whole lot of quite well-off people continue to be well-off, somehow didn't keep me from experiencing some very rough times, nor many people I know.
It could have been worse, of course, but that's not the point. It shouldn't have happened. And when it did, the perps should not have gotten away unscathed.
And, if these issues are not addressed than the threat of something similar happening again remains. And I see rumblings about another possible crash in a lot of writings (and I read widely). And if my, now healthy business, is going to get hit again I am going to be seriously, seriously pissed.
So, to your question: what should have been done differently at AIG? I am certainly not qualified to provide a detailed technical answer to that. I can say that we should never have gotten there in the first place and getting there at all was a shocking failure of corporate and governmental law and oversight.
Once there, after the absolute initial panic, everything should have been public. The problem there was that making everything public would have made clear to the world that all of these banks were propping each other up and were basically frauds and THAT would have lead to investors fleeing the market. So they were certainly in a catch 22. But the thing is, it was their jobs to keep Wall Street honest and healthy -- not mine. And now I don't see quite what we're supposed to do about the fact that these monstrous institutions run the world and have us by the throat.
In 2008 lots of influential people were yapping about the irresponsible homeowners buying the toxic mortgages -- but were utterly silent about the crime scene that was this meltdown. Keep in mind how people were going on about "moral hazard" with respect to homeowners but not a yip from on-high about the moral hazard of paying off Goldman Sachs at 100cents on the dollar. Not until the hearings...
Reading the transcript brought back a good deal of rage. All those brilliant, educated, well-paid people explaining why none of it was really their fault. Some of them felt kind of bad about it and thought there should have been better laws. (Cue hollow laugh.)
You found it "amusing" that the public -- us silly, silly people -- have this, apparently mistaken idea that TARP and all the rest wasn't transparent. After all, they came clean once we found out what they'd been doing!
Had there not been those hearings and a lot of other work the problems that came to light would not have been exposed or documented, nor would any attempt to solve them have been made. Only time will tell if the official responses have been sufficient.
So I very much appreciated Elizabeth Warren and others who worked to find out exactly what had taken place and where it all was going to lead. Your antipathy towards her work frankly baffles me. I don't see why you can't feel good about AIG if you think it's all so peachy and simultaneously appreciate that people have been working to try to avoid another AIG.
Paula,
All that "complexity" that AIG defenders claim is the reason we had only one choice. We were in the too-big-to-fail situation (that we still are in). And that's really what the debate was and is all about: how did we get there and how do we get out?
I will agree that is a critically important debate to continue to have. I would tend to disagree with you that the US financial system is in the same position with respect to the too-big-to-fail problem as it was before this crisis, though.
And, I would suggest that Dodd-Frank goes quite a long way towards ensuring that financial institutions won't be in that position again. But, that's a whole other debate and conveniently avoids the issue at hand - whether or not Elizabeth Warren still believes that bankruptcy was a serious option for AIG when anyone who fully understands this issue knows it was not.
So, you have decided to change and widen the parameters of our little debate here and refuse to offer up even one alternative that had any serious prospect of resolving the AIG rescue through bankruptcy to support your apparent belief that Elizabeth Warren was right and Secretary Geithner was wrong and that there was a better way to resolve the AIG crisis.
Because, you can't or you won't. Either way, that tells me something about you.
My impression is that Elizabeth Warren has a better understanding of the financial sector and of the bailouts than any of us here, from her academic work before she got into politics. I doubt that she naively expected that we could just let the TBTFs go through ordinary bankruptcy with no problems. I don't doubt that she made Geithner squirm on the subject, though.
dsws,
Well, she didn't come close to making Geithner squirm, despite asinine press accounts to the contrary. His experience and expertise in putting out financial fires is quite extensive and, I think, unmatched.
Watching as many of those hearings as I did, including where he and Warren interacted, was a great learning experience. They did have some excellent exchanges and Warren performed her role very well, if not always respectful toward the treasury secretary. Geithner took it all very well, though, and always commended Warren for her direct and thoughtful questions.
dsws,
I doubt that she naively expected that we could just let the TBTFs go through ordinary bankruptcy with no problems.
I agree. She just appeared to have a problem understanding why any sort of bankruptcy option, or threat of bankruptcy, was not going to work given all of the extenuating circumstances and the very tight time constraints that engulfed the AIG fiasco.
As Geithner was doing a yeoman's job of explaining why bankruptcy was not a viable option, she just seemed not to be listening.
I assume that she's at least somewhat of a politician, given that she did make it to the Senate. If so, it pretty much follows that she didn't want to look egg-headed.
However, I don't understand why no threat of bankruptcy could possibly work. I don't even have a very good idea of the range of things that "work" means in this context. Are there really no possible concessions that could have been extracted from AIG or its counterparties by any such threat? That seems unlikely. Sure, it's a threat we wouldn't have wanted to carry out. But it's also a threat that they wouldn't have wanted us to carry out. It wouldn't have been a direct threat, most likely, nor would it have been most useful after the economy was already collapsing.
The government's number one goal, as the 2007 crash became imminent, should have been to prevent the next one. Ameliorating this one was something we had a vital interest in as well, of course, but it should have been a close second to preventing the next, rather than barely ahead of preserving the fortunes and reputations of the perpetrators.
Letting AIG go to bankruptcy was a nuclear option. And when facing a nuclear showdown, you need to convince the other side that you're crazy enough that you might push the button.
dsws,
Bankruptcy would have taken time ... a lot of time, months if not years to settle on a value for the exotic derivatives that no one knew how to put a value on.
Unfortunately, the government didn't have the luxury of time and all of the big banks knew it. No one was going to have to take the proverbial haircut because they all knew the government was behind the eight ball and the clock was ticking.
The government had no leverage and no choice but to bailout AIG or face the catastrophic consequences of a global financial collapse.
Remember what happened with the Lehman bankruptcy? Well, multiply the consequences of a similar circumstance for AIG by a very large order of magnitude.
Apparently, only one of the thousands of counterparties to AIG (in the US and abroad) offered to take a loss but only if all of the other counterparties also did so. Of course, that offer was never matched by any of the other counterparties.
Below is a link to an interesting article posted at the Huffington Post by David Fiderer on the important details of the AIG bailout - details ignored by critics such as Spitzer and Barofsky - that amply demonstrate how and why the government's options were severely limited and did not include bankruptcy or the threat of bankruptcy.
http://www.huffingtonpost.com/david-fiderer/rewriting-history-to-blam_b_372127.html
There's a lot I knew at the time, but don't remember now. There's also a lot I never knew to begin with. But I can't believe that what we got was the best deal we could have gotten. It's just not plausible.
Time was not on our side, but we had different amounts of time at different times. If there had been leadership from somewhere in government (which I'm thinking of broadly enough to include the Federal Reserve), to make it clear that the country would be better off with a massive depression now than with a lesser depression now and a massive one later, we could at least have gotten something a little more likely to prevent or ameliorate the next one than Dodd-Frank is. I don't really care about a haircut to the perps for its own sake, but incentives are rather relevant here. The bandits all made out like bandits, so the next batch has no incentive to forsake banditry.
dsws,
If there had been leadership from somewhere in government (which I'm thinking of broadly enough to include the Federal Reserve), to make it clear that the country would be better off with a massive depression now than with a lesser depression now and a massive one later, we could at least have gotten something a little more likely to prevent or ameliorate the next one than Dodd-Frank is.
That, I'm afraid, is a most decidedly non-serious statement.
dsws,
The bandits all made out like bandits, so the next batch has no incentive to forsake banditry.
So, you have no faith in the provisions of Dodd-Frank. That's understandable.
I believe that Dodd-Frank is a significant and substantial piece of legislation that shouldn't be dismissed in such a cavalier fashion.
If we postulate that everything was about a millimeter from being just fine in 2007, and all the stars had to align against us for the crash to unfold as it did, then Dodd-Frank would probably be adequate. If we theorize that financial markets are inherently prone to bubbles, conducive to opacity, and rife with principal-agent problems, and capable of great influence on the health of the real economy, then it's not even close. I'm amazed how much I've forgotten already, but I thought a lot (before it was clear what Dodd-Frank might include) about what would have to be done, and Dodd-Frank did almost none of it.
To have any regulation function effectively, in an area where many different activities can be used as substitutes for each other, you need to deal with regulator shopping. The key facts about regulator shopping are, first, that regulatory agencies are funded by fees on the firms they regulate, and second, that it's easy to re-structure a huge, complex business to fall under the authority of a different regulator. The second one is pretty much unavoidable, unless we obliterate complex financial dealings, which isn't an option I'm interested in. As long as the firms being regulated control the regulators' purse-strings, they have the upper hand. Changing that is one of the minimum requirements, and Dodd-Frank didn't do it. Getting rid of OTS is as likely to be effective as getting rid of the Federal Home Loan Bank Board.
Derivatives were formerly contracts, made between the parties with no transparency to anyone. Bringing in a clearinghouse as Dodd-Frank does is a step in the right direction, but I thought at the time that many more of them should have been traded on exchanges. I don't remember what my reasoning and exact criteria were, though.
Of course, one component of being too big to fail is sheer size, and the few biggest firms are fewer and bigger now than before.
I don't remember what else there was.
dsws,
I don't remember what else there was.
It sounds like your memory is quite a lot like mine. :)
Here's a little summary of the Dodd-Frank reforms, just for completeness sake, since we've been going back and forth about them in this long thread ...
http://www.banking.senate.gov/public/_files/070110_Dodd_Frank_Wall_Street_Reform_comprehensive_summary_Final.pdf
I suppose we'll have to wait and see how effective these comprehensive reforms and stringent rules of the road (I don't think all of the rules have been written yet, but I could be wrong ... I don't remember how far Geithner got before he left office; speaking of which, he's got a book coming out later this year detailing the handling of and response to the financial crisis) will be, in the final analysis. Hopefully, we'll all see the next possible "crisis" coming before it becomes a real crisis and, with the proper authorities and rules in place, we'll be in a position to act in a more timely fashion to avert another disaster.
Just a couple more thoughts on Dodd-Frank ...
My favourite part is the 'Death Panel', as Barney Frank likes to describe the procedure to deal with financial institutions that get into too much trouble and threaten the stability of the financial system as a whole by mercifully putting them out of their misery in an orderly fashion without the use of taxpayer dollars. You see, there really are death panels and they reside within the Dodd-Frank Wall Street reform legislation!
And, here's a quote from a guy who understands the fundamentals of financial reform and knows that we can no longer rely on the "sound judgement" of people in charge of the ratings agencies and other regulators. Rather, the financial reforms must lay out a set of very strong rules, regulations and requirements that must be strictly enforced:
"Be wary of the benefits of hindsight and be skeptical of the capacity for foresight" ...Treasury Secretary, Tim Geithner
Geithner went on to say that we must design a system of reform that recognizes that limitation. I think Dodd-Frank does that.
Elizabeth (51)
So, you have decided to change and widen the parameters of our little debate here and refuse to offer up even one alternative that had any serious prospect of resolving the AIG rescue through bankruptcy to support your apparent belief that Elizabeth Warren was right and Secretary Geithner was wrong and that there was a better way to resolve the AIG crisis.
I never claimed the ability to offer some technical variation on TARP -- that was your demand. And talk about "widening the parameters" -- I'm now required to provide an alternative plan that has any serious prospects of resolving the AIG... -- my "thoughts" are not sufficient. You also have decided that this is a gunfight between E. Warren and Tim Geithner, whom you seem to strongly admire.
If we have to take sides, which you seem to be demanding, I'll go with Elizabeth Warren. After all, Tim Geithner was one of the key folks in a key position who watched the whole mess develop and was either unwilling or unable to stop it (I'll assume both, though you, with your better knowledge of him, may know better.) When he was tasked with the job of dealing with the mess he threw money at it. I don't dispute that throwing money at was effective -- it pulled things up and bought time. But acting as though that was some kind of thrilling act of courage or brilliance - nope. He threw massive amounts of money at a bunch of criminals and incompetents which gave them time to clean some things up.
Be still my beating heart.
Paula,
Well, at least you didn't quote me out of context. :)
As for who is the best fireman when it comes to extinguishing financial fires and to understate reality, it's not even close. Even Elizabeth Warren must know this.
Does Geithner share a lot of the blame for not recognizing the coming disaster and not doing enough to avert or mitigate against it before it developed into a full-blown, global financial mega-crisis? Absolutely, positively, unequivocally.
All you are required to do, by the way, is back up your contention that Elizabeth Warren was right and that there was a better way to handle the AIG rescue. I don't expect a technical treatise, just a thought or two from you in general terms to convince me that there was a better alternative and serious option.
Of course, you would be the first do so, as even some of Geithner's toughest critics have failed in this regard.
The bullet points from that pdf on Dodd-Frank:
Consumer Protections with Authority and Independence:
That's nice, but kind of irrelevant. The problem wasn't that some consumers got gouged. The problem was that the financial system collapsed, and took a big chunk of the economy with it. Yes, some consumers did get gouged, but that was only tangentially connected to the problem.
Ends Too Big to Fail Bailouts:
I don't think so. That's the crux of it. Being able to liquidate failed firms doesn't solve the problem. If a firm is so huge and so intertwined with everything that its liquidation would collapse the economy, you can't liquidate it even if you have the authority to do so. Chapter 7 bankruptcy would have liquidated AIG. We didn't need any authority to just let it go into bankruptcy. But it would have been catastrophic for the economy.
Give another variation on liquidation procedure, with no meaningful limitations on what a firm can do that will make it catastrophic to liquidate, and you're back in the same situation as soon as a firm reads the fine print and sees how to make a buck off it.
Advance Warning System: Creates a council
That's not a law. That's a cliche. When you don't want to actually do anything about a problem, create a council to look at it.
Transparency & Accountability for Exotic Instruments:
Eliminates loopholes
Plug a few loopholes, while leaving the system basically unchanged, and you've accomplished precisely nothing.
Executive Compensation and Corporate Governance:
Provides shareholders with a say on pay and corporate affairs with a non-binding vote
A non-binding vote? On something that's at best tangentially relevant? This is one of the major points of the supposed solution to a deep and pervasive problem that caused a depression and foreseeably will again unless it's radically changed. Come on.
Protects Investors: Provides tough new rules for transparency and accountability for credit rating agencies
... while leaving credit rating "agencies" entrenched in their central role, and unchanged in their basic nature. Not even close to being a serious response.
Enforces Regulations on the Books:
Happy new year! Oops, it's February already. That resolution is long gone. Because as long as the system is basically unchanged, saying we're going to enforce better is nothing but a new year's resolution.
There's a reason why "enforce the regulations on the books before you start passing new ones" was a traditional NRA position on gun control.
dsws,
So, there is nothing that you like about the Dodd-Frank Wall Street Reform and Consumer Protection Act.
But, did you know that Dodd-Frank was not the end but merely the very BEGINNING of the process for financial reform?
Did you also know that the Financial Stability Oversight Council (FSOC) that you call a cliché is responsible for writing a comprehensive array of stringent new rules of the road that must be enforced and are not subject to the whims of individual regulators? The FSOC is actually a very integral part of the financial reform process laid out in Dodd-Frank - you should check it out!
http://www.treasury.gov/initiatives/FSOC/Pages/home.aspx
As for too-big-to-fail and your appropriate concern that there should be limitations on what firms can do ... there are stringent new capital requirements, for one example, that become ever more stringent as risk-taking increases and that act as a muscular disincentive to the kind of risk-taking that threatens the stability of the financial system as a whole.
Dodd-Frank actually prohibits the government from intervening to rescue a financial institution, regardless of size or global reach, that has mismanaged itself into failure and provides a mechanism to safely and responsibly wind down its operations without significant damage to the financial system as a whole.
I'm surprised that you completely dismiss this financial reform process that seems to me to be pretty comprehensive and substantial. Is it perfect? I'm guessing not. Is it a vast improvement over the status quo that lead to the most destructive financial crisis since the Great Depression? Yes, I think it is a serious and ongoing effort to address the tragic deficiencies in the financial system and to make it more stable, equitable and resilient.
It doesn't matter whether it's "substantial", if it's completely ineffective.
Its solution to bailouts is to prohibit the government from intervening, when a firm gets the economy hostage and made itself impossible to liquidate without a bailout? How can anyone take that seriously? It's a law: if necessary, it will be superseded by another law. No matter what promises we make now, we're not going to let another Great Depression happen. Certainly not if the promise is just an ordinary statute. But even if it were a constitutional amendment saying no bailouts allowed, you know that people would find a way to re-interpret it, or simply ignore it, when staring into the abyss of a decade or two of soup lines and 30% unemployment.
If you want to prevent bailouts, you have to prevent firms from getting that big, complicated, opaque, and interconnected in the first place.
I haven't found anything saying exactly what these new capital requirements are. Maybe they're a magic bullet. But I doubt it.
dsws,
If you want to prevent bailouts, you have to prevent firms from getting that big, complicated, opaque, and interconnected in the first place.
That has not been the Canadian experience. Did you know that of all the major industrialized countries, Canada was the only one where there were no bank failures during this crisis? And, we have a disproportionate number of the world's largest financial institutions.
Why was that? One word ... no, two words - effective regulation.
The size and interconnectedness of financial institutions is not the problem, per se.
I don't know what all of the new rules of the road and capital requirements are, either. I'm going to try to find out ... for a future discussion! :)
Elizabeth:All you are required to do, by the way, is back up your contention that Elizabeth Warren was right and that there was a better way to handle the AIG rescue.
I'm not required to do anything.
Asking you to explain why you thought E. Warren was wrong which is how this discussion started is not the same as me making an affirmative argument that she was right.
Paula,
I've done my part. Clearly, you are not willing or able to do yours. I'll remember that for future reference.
"I'll remember that for future reference."
As will I.
Heh.