WSJ editorial this morning: “We hold no brief for Citi, which has been rescued three times by the feds…. [But] good luck finding a justification for [the $7 billion figure] in the settlement agreement. The number seems to have been pulled out of thin air since it’s unrelated to Citi’s mortgage-securities market share or any other metric we can see beyond having media impact.
“This week’s settlement includes $4 billion for the Treasury, roughly $500 million for the states and FDIC, and $2.5 billion for mortgage borrowers. That last category has become a fixture of recent government mortgage settlements, even though the premise of this case involves harm done to bond investors, not mortgage borrowers.” More: Bloomberg. And the settlement directs Citigroup to hire former Eric Holder associate Thomas Perrilli, now at Jenner & Block, for a monitorship that is likely to prove an extremely lucrative plum [Reynolds Holding, Alison Frankel] Also: Ira Stoll.
We mentioned Philip K. Howard’s new book “The Rule of Nobody” the other day. Here’s another excerpt (which also appeared in the Wall Street Journal’s “Notable and Quotable”:
The 2009 economic stimulus package promoted by President Obama included $5 billion to weatherize some 607,000 homes—with the goals of both spurring the economy and increasing energy efficiency. But the project was required to comply with a statute called the Davis-Bacon Act (signed into law by President Hoover in 1931), which provides that construction projects with federal funding must pay workers the “prevailing wage”—basically a union perk that costs taxpayers about 20 percent more than actual labor rates. This requirement comes with a mass of red tape; bureaucrats in the Labor Department must set wages, as a matter of law, for each category of construction worker in each of three thou- sand counties in America. There was no schedule for “weatherproofers.” So the Labor Department began a slow trudge of determining how much weatherproofers should be paid in Merced County, California; Monmouth County, New Jersey; and several thousand other counties. The stimulus plan had projected that California would weatherproof twenty-five hundred homes per month. At the end of 2009, the actual total was twelve.
Kevin Funnell, on “The Long-Range Consequences Of Adopting The Mating Habits Of A Praying Mantis,” quotes Matthew L. Brown in Boston Business Journal on the consequences of slamming the institution that agreed to help rescue WaMu and Bear Stearns, and is now paying for their sins: “It’ll be a long time, indeed, before a big bank answers the federal help line.” Related: Daniel Fisher, Forbes.
“A new analysis from the Brookings Institution’s Ted Gayer and Emily Parker found that the program was fairly inefficient as economic stimulus and mostly pulled forward auto sales that would have happened anyway. It also cut greenhouse-gas emissions a bit — the equivalent of taking up to 5 million cars off the road for a year — but at a steep cost. … ‘In the event of a future economic recession,’ they conclude, ‘we would not recommend repeating the [Cash for Clunkers] program.’” [Brad Plumer, Washington Post; earlier]
A natural experiment: Virginia law allows foreclosures to happen rapidly, Maryland law delays them. Which state has bounced back more smartly from the housing crash? [Michael Schearer, earlier]
My new Cato post has a suggestion for Time magazine: how about prosecuting only the executives who’ve actually committed crimes? (& Kenneth Silber, RealClearPolitics “Best of the Blogs”). Related: Politico.
An accusatory film about the financial crisis glides over some inconvenient complications. [Ezra Klein, Washington Post]
Magical thinking at the FDIC [David Skeel via Bainbridge]
Along with its formal report, the commission probing the financial crisis of 2008 has done an online archival dump of internal company documents that some hope, and others fear, will be of great help to litigators — even perhaps a “Wikileaks for the class action bar,” which with its allies was well represented on the commission and staff. [BLT; earlier]
More: David Frum has been doing a series of blog posts on the report’s substance.
Steve Chapman, as usual, keeps a cool head about things. And I’ve got some links at Point of Law on the remarkable House-passed proposal to slap a punitive tax on the compensation of many thousands of financial institution employees who are not even notionally to blame for the current crisis, as well as on the threats of violence to AIG employees, which are being met with complacency if not encouragement in some surprisingly respectable circles. Update: Point of Law post now considerably expanded, and with followups here and here.
Roger Parloff at Fortune looks at the outlook for prosecutions over the financial implosion. One major source of potential criminal liability: over-rosy business statements put out by executives in hope of keeping customer/supplier confidence from tanking (cross-posted from Point of Law).
Did we imagine that it was not going to occur to anyone to have the government start using its big new stakes in banks and other commanding heights of the economy to, as it were, command? (David Frum, Oct. 30).