"It's eerie -- I read the news from the Beltway, and there's this disconnect with the polls from the Midwest that I see all around me."

That's from Ann Selzer, the Iowa pollster who's an expert on public opinion throughout the midwest, as quoted by Ben Smith.

It really is the big story of the first weeks of the Obama administration. In Washington, it was a battle royale between the new president and an emboldened Republican minority. At times they seemed to have him on the ropes. And yet in the country at large, Obama remains super popular. And the GOP is wildly unpopular.

In fact, it even goes deeper than this. As Elana noted yesterday, the plan of the congressional GOP -- to the degree they have one -- is to faux cozy up to Obama and say that they both face a common foe in the Democratic Congress. The idea being that since "Congress" is really unpopular they can run against Congress.

But there's a very big problem with this strategy above and beyond the absurdity of the argument. "Congress" may be really unpopular. And the Democrats now control Congress. But politics is a zero sum game. At the end of the day, in almost every case, you've got to pick a Republican or a Democrat when you vote. And if you look at the numbers, congressional Democrats are pretty popular. And congressional Republicans are extremely unpopular. If you look at the number, the Dems are at about 50% or higher in most recent polls, while the GOP is down in the 30s.

The city remains wired for the GOP. Not that it's done them a great deal of good of late. But it remains a key part of understanding every part of what is happening today.

Late Update: Matt Cooper thinks I'm overstating how much DC is wired for the Republicans.

President Obama says he can understand his critics who don't think the government can administer the stimulus properly -- after all, Washington didn't set a very good example in the last few years. That and other political news in today's TPMDC Saturday Roundup.

Senate passes Stimulus Bill; Obama will sign it on Monday.

Norm Coleman's chances of overturning the election result in Minnesota just got a whole lot more remote.

Obama to task economists who missed the housing bubble with rejiggering Social Security.

'Blackwater', well-known mercenaries and perhaps war criminals, are tired of you beating them up over various instances of fraud and bad-acting. So they've come up with the ingenious plan to rename themselves with a word you can't pronounce -- Xe.

Noooooooowww, just try to give them a hard time when you can't pronounce their name!

So John McCain says that Obama needs to work on bipartisanship, which is about par for the course from McCain and for other Republicans these days. I just heard a reporter on MSNBC say that the Republicans have emerged from this battle with their reputation for fiscal discipline strengthened while Obama has had his reputation for bipartisanship tarnished.

As annoying as it is to hear this stuff, I can't say I'm losing a lot of sleep over it. Because in addition to being nonsensical on its face, I really don't think most people around the country are seeing any of this that way. The primary aim of this is to work the refs, the refs being DC political reporters, who are usually pretty easy to work. And they seem to be so in this case. But I don't think this is what most people see. I think the number of people who are into bipartisanship is greatly overstated. However, the number of people who are into it are heavily correlated with those who are politically gettable. So it's not nothing. But Obama has made repeated overtures to Republicans and included probably more of their goodies than I'd like in his bill. And he's been greeted by a phalanx of opposition, nonsense and trash talk.

It's true that many voters without strong partisan attachments want to see politicians 'get some things done' and not just get into political fights. I think what most people see here is one side of equation trying to put together a bill with big majorities, which means necessarily ones that wouldn't be his own parties wish list. The other party has used the overture exclusively as a vehicle for scoring political points and, more poetically put, being dicks.

For my part, I don't think there's any problem with having party line votes where both parties really fundamentally disagree on the policy question at hand. But to the extent that there's a question of who's making an effort to operate in a bipartisan manner, this one is really not even close. Reporters' idea that the entire 'bipartisan' enterprise is Obama's responsibility, as though Republicans, in their depleted state, actually get to dictate the content of bills -- I don't think people buy that. Which is probably why Obama's still really popular and congressional Republicans are extremely unpopular.

The embarrassingly mishandled prosecution of then-Sen. Ted Stevens (R-AK) was the sort of thing you figured would be addressed as soon as the new hands took over DOJ, but today a federal district judge in DC held prosecutors in contempt of court for failing to turn over documents to the defense by a court-ordered deadline:

During Friday's hearing, Sullivan repeatedly asked three Justice Department attorneys sitting at the prosecution's table whether they had some reason not to turn over the documents. They finally acknowledged they did not, and Sullivan exploded in anger.

"That was a court order," he bellowed. "That wasn't a request. I didn't ask for them out of the kindness of your hearts. ... Isn't the Department of Justice taking court orders seriously these days?"

He said he didn't want to get "sidetracked" by deciding a sanction immediately and would deal with their punishment later. But he ordered them to produce the material by the end of the day.

"That's outrageous for the Department of Justice -- the largest law firm on the planet," he said. "That is not acceptable in this court."

Sullivan held all three attorneys sitting at the table in contempt and demanded repeatedly to know who else was involved in withholding the information. Another government attorney sitting in the back of the courtroom stood up and gave her name.

Reuters headline: "McCain says Obama needs to work on bipartisanship"

Sen. Judd Gregg (R-NH) will now vote against the stimulus bill.

The final Senate vote is now set for 5:30 p.m. ET.

It pains me to say this. But Sen. John Cornyn doesn't seem to be too bright. Cornyn was just on MSNBC explaining that spending in a severe economic downturn doesn't make sense and should be replaced by tax cuts since individuals can spend money "more efficiently" than government. I guess he doesn't get that the whole point of a stimulus bill is that in a severe recession individuals -- acting on rationale individual economic motives -- aren't spending. And only government, as a policy decision, can spend at a high rate notwithstanding the state of the economy.

He also claimed a 3x multiplier for tax cuts, which I don't think anyone believes. But I'm more interested in his point about the relative efficiency of private vs. public sector spending since it seemed to show that he doesn't understand what a recession, let alone a severe recession (which has qualitatively different dynamics), even is.

I know there are contrary theories of how economies work. But not grappling with the high level of risk in the economy that makes businesses and people unwilling to spend ... not sure you can enter the conversation without getting that.

From TPM Reader MF ...

This is similar to a point that's already floating around, but for all the complaints in the blogosphere that President Obama wiffed the negotiations over the stimulus out of an excessive attempt to appear "bipartisan," it seems hard to deny at this point that Obama's stimulus strategy has been incredibly effective. First, he proposes the package that is more or less what he would like to see enacted. Then, House Democrats run up the tab inflating it above the original targets and pass it on a party-line vote. Finally, "responsible" moderates in the Senate, including Republicans, save the day from those partisan House Democrats by bringing the package back down to earth, which just so happens to be in the ballpark of what Obama originally proposed. Done and done. It's all political kabuki, and everyone played their part brilliantly, especially Nelson and Collins, who now get to go home and take credit for their post-partisan "fiscal responsibility." As much as I share many people's skepticism of all the "trust Obama's secret plan" rhetoric, in this case, it seems hardy to deny that the strategy he had all along has worked.

I look forward to seeing your take on the stimulus process and what this says about the dynamic we can expect enacting the rest of Obama's agenda.

For the backstory, see Greg Sargent.

Did he really hold up a dead mouse on the floor of the House? I can't tell what's in that little bag he shook around there.

Late Update: Price's flack tells Greg Sargent, "It was a toy mouse, from a pet store."

I can just see some well-scrubbed young GOP aide, new to Washington, being sent out to a pet store to find a toy mouse to use as a prop. Heady day for that kid.

Can Obama ever recover from Judd Gregg deciding not to be Commerce Secretary?

Especially since he's taken on the status of a cult hero?

In our interview on Friday, one of the questions I asked Joe Stiglitz was: if it's so obvious that all this Tarp 2/Bailout stuff is a bad idea and not going to work, why do we keep coming back to it?

Here's his answer ...

I keep hearing about this and have mentioned it here a few times in passing.

From Bloomberg ...

Treasury Secretary Timothy Geithner, under intensifying pressure from Wall Street and Congress to complete his financial-rescue plan, is being handicapped by a dearth of staff experts critical to the effort.

Geithner's strategy of forging a partnership with private investors to buy toxic assets would benefit from aides steeped in law and finance to thresh out the competing interests in the plan. Yet the administration has yet to nominate people for any of the Treasury's financial posts as the White House seeks to avoid Senate confirmation battles.

Administrations often take a while to fully staff out. But under present circumstances Treasury is really sui generis.

So Lincoln, Obama and a Commerce secretary walk into a bar ... well, at least Obama's cracking jokes about it. That and the day's other political news in the TPMDC Morning Roundup.

On Gregg's rendezvous with destiny ...

By citing reservations about the economic recovery package, Gregg reinforced widespread GOP criticism about wasteful spending that has less to do with reviving the economy than rewarding Democratic constituencies. And by noting his differing view on the census, Gregg breathed life into Republican charges of a White House power grab over a critical Commerce Department function.

Both issues are part of an emerging GOP case against Obama and the ruling Democratic Party: Strip away the new face, the lofty rhetoric and the promises of post-partisanship and you'll find the same big-spending party of old, bent on politicizing government to consolidate its hold on power.

Even with the stimulus package on the verge of passing later this week, the unanimous GOP vote against the bill in the House and the near-unanimous opposition in the Senate revealed a Republican Party surprisingly united in direction and in message for perhaps the first time since losing its congressional majority in 2006.

Simon Johnson, an econ professor at MIT and former IMF economist, started blogging recently at TPMCafe. And David Kurtz interviewed him in today's episode of TPMtv. The argument Johnson makes is one that's been tossed about in a loose aphoristic way in the public debate but seldom gets put in such blunt and concrete terms. What Johnson argues is that in economic crises in recent decades where the IMF has worked to step in and put things right, seldom if ever do things get fixed unless the political power of the group that caused the mess is somehow disrupted -- in most cases the political power of the group that ran the big financial institutions.

Not that political elites are wholly displaced or overturned. But there's got to be some fundamental break in their power to get the necessary reforms through.

A couple things occur to me about this. One is that whatever you can say about the IMF and the World Bank, the key factor behind their role as crisis-fixing and stabilizing institutions in the post-war era is that they had the power of the US behind them (and the developed countries more generally). So whatever the wisdom of their interventions, they usually had the power to dictate solutions. And that very often meant overruling political elites who either would not face problems or had vested interests in not facing them.

Now, let me stipulate that the record was by no means perfect. I know that. But for the purposes of this discussion, my point is that there was an external power that could step in in a politico-economic situation that had become dysfunctional or stuck. For the US (or probably Europe, for that matter), though, there's no outside force.

Back to the initial point. Everyone is always saying: how can we fix the problem as long as the people we have in charge are the people who created the problem in the first place? Very true in many ways. I've said it a lot myself. But this point has brought it home to me in a much more concrete way. The assumptions, the vested interests, the wealth, the political power are just too much to overcome.

Here's the interview ...

The Times has a piece in tomorrow's paper coalescing the growing number of experts who believe that many of the big banks are insolvent and that -- whatever you want to call it -- the government is going to have to step in and really resolve the crisis, through some process of seizing the failed banks, cleaning them up and selling them back into private hands.

It's a difficult process to chart. But the public mind seems slowly to be shifting in this direction.

The article quotes Simon Johnson and Adam Posen, both of whom we've interviewed in recent days on TPMtv. Click the links to see the interviews.

Has anyone else read this book? Many of you must have. Only Yesterday by Frederick L. Allen. The classic first-draft history of the 1920s prosperity up to the 1929 crash, written from the vantage point of 1931.

Gibbs on Gregg:

"We regret that he has had a change of heart." Gibbs said that Gregg had sought the job, promising to support Obama's agenda, and that once it became clear that wasn't possible, "it became necessary for Senator Gregg and the Obama administration to part ways."

From Bloomberg ...

Stanford Group Co., a Houston-based investment firm led by billionaire R. Allen Stanford, is under investigation by U.S. securities regulators over sales of certificates of deposit in its affiliated offshore bank and the consistent, above-average returns those investments pay

Why not former FCC Chair Reed Hundt for Commerce Secretary? He's got the chops on all the key Commerce Department issues: trade, Census, broadband, stimulus. He's got better politics than anyone else you're going to get for the job. And he was part of the transition team. Also, not to be overlooked: he's a Democrat, so he might actually pursue sensible policies.

Late Update: Jon Taplin says it should be Eric Schmidt of Google. But having the head of Google get access to all the Commerce Dept. data and then make a widget out of it. Don't know about that.

Best joke about Gregg withdrawal? (There have to be so many.) Send me your entries.

(ed.note: I'm tempted to suggest that Gregg was reviewing his records in preparation for his confirmation hearings and discovered that he's a conservative Republican and Obama's a Democrat, etc. and felt compelled to withdraw. But I admit you need a bit more poetry to make the whole thing sing.)

Late Update: Further possible joke fodder: Gregg says he notified the White House of his decision "earlier this week."

Norm's legal team finally sees the futility of arguing for the counting of absentee ballots obtained via forgery.

Meanwhile, Eric Kleefeld notes that the legal arguments both sides are making don't match up with their party affiliations. Right is left and left is right.

As I mentioned earlier in the week, former IMF chief economist Simon Johnson, who now teaches at MIT, brings a slightly different perspective to the U.S. banking crisis, that of someone who has studied and been involved with resolving financial crises in developing nations. From that perspective, a key step in permanently resolving the crisis involves wresting control of the banking system from the elites who were at the helm when the crisis occurred, a step, Johnson argues, that neither the U.S. nor any other western nation has yet been willing to take:

According to our Matt Cooper, Gregg called New Hampshire Gov. John Lynch (D) a few hours ahead of releasing his withdrawal statement to alert him. But the White House appeared blindsided by the Gregg withdrawal, according to various reports, so much so that some officials were first learning of the news from reporters.

A Democratic Hill staffer writes in:

It's hard not to think that Gregg's withdrawal, with the grumbling about the census and the stimulus, was not timed to cause the most damage possible to the Obama administration. Releasing the statement just as Obama took the stage in Peoria was clearly designed to undermine the President's event. The fact he scheduled a presser only seems to confirm it. The classy exit would have been to wait til tomorrow afternoon to quietly bow out. Basically Gregg decided not just to politely decline, but rather to blow shit up and burn the bridge behind him. Do not think this portends good things for the wider political climate.

If the larger GOP strategy can be describe as putting all of their chips on "FAIL", this has to be seen as a significant addition to that pile, no?

Late Update: For his part, Gregg said at a press conference just now that he gave the White House "fair warning" of his withdrawal.

Chris Dodd is penning a book on how, as chairman of the Senate Banking Committee, he saved the world from financial collapse last September.

Judd Gregg tells Politico: "The fault lies with me. ... I may have embarrassed myself but hopefully not [Obama]."

Statement from the White House:

"Senator Gregg reached out to the President and offered his name for Secretary of Commerce. He was very clear throughout the interviewing process that despite past disagreements about policies, he would support, embrace, and move forward with the President's agenda. Once it became clear after his nomination that Senator Gregg was not going to be supporting some of President Obama's key economic priorities, it became necessary for Senator Gregg and the Obama administration to part ways. We regret that he has had a change of heart".

Did Gregg bag because New Hampshire GOPers gave him too hard a time?

Huh, I guess that didn't work out.

This is extremely weird. Gregg is out at Commerce, withdrawing for what he appears to be calling irreconcilable differences on Stimulus and the Census.

Now, the Census is one thing because Census administration is a pretty touchy issue between the parties -- largely tied to the Democrats' wanting to count everyone and the Republicans not. And I could sort of see where maybe this issue got dicey.

But the Stimulus? Didn't we have a pretty clear idea what was up with the Stimulus before Gregg got the nod?

Late Update: Hearing maybe that this might not be about Census or Stimulus but maybe Gregg not being able to hack the deluge of crap he was getting from what's left of the New Hampshire GOP.

Later Update: Here's Gregg's statement.

Still Later Update: Gregg is like the Bobby Ray Inman of Commerce Secretaries.

Not sure we were precisely the intended target. But the K Street firm of Foley Hoag sent out an email this morning announcing the formation of their new "new cross-discipline stimulus response team."

Details on how to hop on the gravy train here.

How the right-wing echo chamber fabricated the "Pelosi's mouse" talking point from thin air.

Did Sen. Collins leave Mainers out in the cold on home heating help?

On the other hand, mass transit seems to have gotten a bit more love in the final bill.

Thanks to some timely reader tips, we're getting some of the details on what's in and what's out of the final version of the stimulus bill. Elana Schor reports here and here and here.

Late Update: It never hurts to repeat that until the final i is dotted and t crossed and the bill is filed of record that things are subject to change. But things are pretty far along at this stage, down to the brass tacks.

That Rasmussen poll a week ago, which showed declining support for the Stimulus Bill, got lots of press play. So how about the new Rasmussen poll which shows support for the bill on the upswing? The way Rasmussen has been posing the question yields a general weak support number. But the trend is clear.

From TPM Reader KA ...

I'm not saying that is what they are doing, but a more bold presentation by Geithner, and a more "pro-Sweedish model" statement by Obama would have been like Lincoln and Grant announcing Sherman's March before he started it. First, I doubt that Geithner would announce it because of its impact on the market and its collateral damage on the shares of banks that are well positioned. Also, it would feel like "nationalization" which sounds like a political no-no. Finally, it might lead the troubled banks to subtly or not so subtly mask their troubles or "stresses".

This leads to the question: what are the tactics by which one would implement a "seize and purge" strategy of insolvent banks?

Wouldn't you want to announce these stress tests, find out which banks are really underwater and THEN "seize" (better semantics than "nationalize") those banks. At that point, you would roll out the PR that the Resolution Trust Corporation is your model. Again, i'm not syaing this is what they are doing, but the collection of valuable intelligence is always key to a successful surprise attack.

I don't think that's what they're doing either, not consciously at least. But I take the point that I doubt you ever announce this as a strategy. You just do it. The scramble between when everyone knows it's coming and when it happens would be too hairy.

Also, rather than 'nationalization', if that's going to come, probably a more logical name for it is: do we let the bank regulators say that Citibank is insolvent and have the FDIC come in and seize it? And not just Citi but a few other banks too. And there's more talk that that could be where this "stress test" will end up.

Karl Rove: Obama White House takes "my way or the highway" approach. That and the other (much less gobsmacking) political news of the day in the TPMDC Morning Roundup.

Yesterday, after Tim Geithner's lackluster speech, President Obama told ABC that 'nationalization' of the banks "wouldn't make sense." He specifically referenced the Swedish model. And he offered two basic reasons: 1) We've got thousands of banks whereas the Swedes had only a handful. And 2) We have different political 'traditions' that don't make it credible in this country, which I take to mean that anti-statism is too deep in the American political fabric for it to be workable.

The second point speaks for itself whether you agree with it or not. But it's the first that caught my attention. It's true that we have many more banks than the Swedes had. In addition to the couple dozen well known national banks (perhaps fewer actually), there are thousands of small to medium sized banks spread around the country.

As Obama put it, "Here's the problem -- Sweden had like five banks. We've got thousands of banks. You know, the scale of the U.S. economy and the capital markets are so vast and the, the problems in terms of managing and overseeing anything of that scale, I think, would -- our assessment was that it wouldn't make sense."

What doesn't compute to me about this is that I do not think anyone is talking about a wholesale nationalization of the banking sector -- as in you literally nationalize the whole banking industry. The problem seems to be centered in a very small number of very big mega-banks. And what people are talking about is applying some version of Geithner's bank 'stress test', coming clean about which banks are insolvent and having those banks that don't pass the test taken over, just as little banks go under every week nowadays. (For a more detailed discussion of how this would all work, see our recent interview with economist Joe Stiglitz.)

Late Update: Simon Johnson makes another troubling point. The folks at the Treasury just don't have a lot of experience dealing with all out financial crises. And the folks who do don't seem to think we're going down the right path.

A little nugget beneath the fanfare. Few people had more power in the Stimulus Bill negotiations than Sen. Susan Collins (R-ME). And she apparently used a lot of that juice on Wednesday to get a key whistleblower protection provision stripped from the bill. That's a key provision to help prevent waste and fraud. And, remember, Collins is the ranking member of the main senate investigations and oversight committee.

Obama comments at Ford's Theater rededication ...

Michelle and I are so pleased to be here to renew and rededicate this hallowed space. We know that Ford's Theatre will remain a place where Lincoln's legacy thrives, where his love of the humanities and belief in the power of education have a home, and where his generosity of spirit are reflected in all the work that takes place.

It has been a fitting tribute to Abraham Lincoln that we've seen and heard from some of our most celebrated icons of stage and screen. Because Lincoln himself was a great admirer of the arts. It is said he could even quote portions of Hamlet and Macbeth by heart. And so, I somehow think this event captured an essential part of the man whose life we celebrate tonight.

As commemorations take place across this country on the bicentennial of our 16th President's birth, there will be reflections on all he was and all he did for this nation that he saved. But while there are any number of moments that reveal the exceptional nature of this singular figure, there is one in particular I'd like to share with you.

Not far from here stands our nation's capitol, a landmark familiar to us all but one that looked very different in Lincoln's time. For it remained unfinished until the end of the war. The laborers who built the dome came to work wondering whether each day would be their last; whether the metal they were using for its frame would be requisitioned for the war and melted down into bullets. But each day went by without any orders to halt construction - so they kept on working and kept on building.

When President Lincoln was finally told of all the metal being used there, his response was short and clear: that is as it should be. The American people needed to be reminded, he believed, that even in a time of war, the work would go on; that even when the nation itself was in doubt, its future was being secured; and that on that distant day, when the guns fell silent, a national capitol would stand, with a statue of freedom at its peak, as a symbol of unity in a land still mending its divisions.

It is this sense of unity that is so much a part of Lincoln's legacy. For despite all that divided us - north and south, black and white - he had an unyielding belief that we were, at heart, one nation, and one people. And because of Abraham Lincoln, and all who've carried on his work in the generations since, that is what we remain today. Thank you, and good night.

Sen. Susan Collins (R-ME), ranking member of the Senate's oversight committee, no less, kills a whistleblower protection provision in the stimulus bill.

Republicans' first effort at working with Twitter doesn't pan out so well.

Current WaPo front page headline: "Is Bipartisanship Badly Hurt? Can compromise attract enough GOP votes for Obama to claim bipartisan victory."

Leon Panetta's nomination as CIA director makes it out of committee.

Late Update: Same for Hilda Solis.

Later Update: And Bill Lynn makes it through full Senate to officially become deputy Secretary of Defense.

The House and Senate conferees on the Stimulus Bill were just scheduled to get together for a final semi-ceremonial meeting to agree on the final bill. But the House folks didn't show up. Not clear what that means precisely, but does not sound promising. We'll have more for you shortly.

Longtime reader commenting on the stimulus deal:

Like everyone else, I'm waiting for the details. But from what I've heard so far, this seems to be a remarkable triumph for the new president.

A month ago, Obama economists Romer and Bernstein released job-creation projections that "assumed a package just slightly over the $775 billion currently under discussion." Lo and behold, the final bill comes in at $789 billion. It reportedly includes Obama's proposed tax cuts, comprising almost exactly the same proportion of the overall package. For the past month, media attention has focused on all the changes to the package, and on the controversies it has engendered. Obama has been criticized for failing to forge a bipartisan consensus, for not safeguarding his priorities, and for not taking a sufficiently aggressive role in the negotiations on the Hill. So it's worth stepping back to take note of the fact that the final package looks remarkably like what Obama has wanted all along. In fact, it's closer to that original proposal than to either the House or Senate versions of the bill. Remarkable.

Whether or not it's the right package is a whole separate topic. But as a legislative achievement, coming so early in the term, this is astonishing.

Adam Posen, deputy director of the Peterson Institute for International Economics, who has studied Japan's "Lost Decade" of economic growth, sees startling parallels with our current situation -- including the anemic initial efforts to bailout the banking system. Posen admits that he was slower than some to anticipate the depth of the current crisis, but now that we're here he says there's no good reason to hesitate to follow the Swedish model: wipe out the shareholders of insolvent banks, have the government briefly take them over, and sell off the good assets to new private banks.

Bredesen says he doesn't think he'll get the HHS nod.

Dems still trying to pull executive pay limits from the Stimulus Bill? Apparently so.

What if a leader of the House Dems sent out a profanity-laced video attacking a major outside group? In this case, it's the office of Rep. Eric Cantor (R-VA), House GOP whip, sending out a profanity-laced video attacking union members as mobbish goons, who can't go three words without a four-letter word.

The Washington Post's Stephen Pearlstein, speaking last night on "Hardball":

Rep. Pete Hoekstra (R-MI) twittered himself into some trouble during a sensitive co-del to Iraq and Afghanistan. That and the day's other political news in the TPMDC Morning Roundup.

Simon Johnson: Axelrod and Emanuel Were Right (On the American Bank Oligarchs)

Chafing under new scrutiny and limits on executive paychecks, many big banks are deciding that they've had quite enough of Uncle Sam and want to give the bailout money back as soon as possible. You get the sense we shouldn't have treated them so badly because if we hadn't they wouldn't be forcing us to take our money back. That's the report here from the New York Times.

The interesting thing though, when you read down into the article is that they don't like the scrutiny and interference and they want to pay the money back to get us off their backs. Only, it's going to be pretty hard to pay the money back because no one else is lending money right now, and certainly no one on as generous terms as the US government is. And if they paid back the money a lot of them might well go out of business.

In other words, they'd love to pay it back, especially if they had the money to pay it back, which they don't. So presumably we won't be hearing any more about this but the whining.

Things are tough all over.

The two named institutions are Goldman Sachs and Morgan Stanley, which, at least as far as I understand these things, are probably the healthiest of the big banks, though it's a pretty low bar. Goldman CFO David Viniar tells the Times: "We just think that operating our business without the government capital would be an easier thing to do. We'd be under less scrutiny, and under less pressure. Not that we'd be out of the public eye; we're still going to be in the public eye."

Now, let's assume for the moment that Goldman and Morgan Stanley really don't need government TARP money or any other direct injection of taxpayer funds. This still doesn't account for all the indirect ways most if not all of these companies are only afloat today because of government rescue and taxpayer dollars. Behind the scenes for something like a year, the Fed and the Treasury have been doing all sorts of guaranteeing debt offerings, loaning money, doing all sorts of things to keep these outfits afloat. That's all in addition to the TARP money.

And take Goldman Sachs. You know that we've spent a hundred billion dollars of so bailing out AIG. Where do you think that $100 billion went? A lot went to pay off various banks and other financial institutions that would have gotten clobbered if AIG went under.

According to this September 2008 article in the Times, an AIG collapse could have led to as much as $20 billion in loses for Goldman, which was AIG's largest trading partner. The simple truth is that none of these outfits can go it on their own. Most are already on their feet today because of government support. And others probably could not have survived without systemic support for the whole industry.

It's a real feather in the cap of Politico that they published this news article which claims that the newest scientific data says we're actually experiencing global cooling.

DC conservatives' top climate science expert a former producer for Rush Limbaugh.

We interviewed Nobel Prize-winning economist Joe Stiglitz on Friday about the bank bailout. And I focused on two key questions. What's wrong with the idea of buying the 'toxic assets' from the banks? And just what happens if we let these banks go bankrupt instead of continuing to prop them up with continuing bailouts?

Full-size video at TPMtv.com.

Late Update: On a related note, Paul Krugman has chimed in on his reaction to Geithner. His reaction is similar to others I've heard: It doesn't include a lot of the terrible ideas we'd been led to believe. It also includes the kernels of what could be very good ideas (i.e., the bank "stress tests"). But in general, it's just not clear what the plan even is.

Why did Obama pick a senior executive from embattled UBS to serve on his economic recovery board? UBS, you may recall, is embroiled in a widening federal investigation into what prosecutors allege was a massive tax evasion scheme concocted for wealthy bank clients. Another senior UBS executive has already been indicted and is awaiting trial in Florida. Zack Roth reports.

Bernard Avishai looks at the various options after Israel's very weird election result. His bet: Netanyahu forms a hardline rightist government and takes his chances bucking Obama.

MJ Rosenberg argues that a Netanyahu government without the neo-fascist Lieberman is better than a Livni government with him.

It's worth remembering here that the end of Netanyahu's first premiership was brought about in significant part because he got frozen out in Washington (his criminal behavior didn't hurt either). In some ways, that's what happened to Shamir's government in the early 90s, which paved the way for Rabin's return.

Boy, that's pretty dumb. It sounds like there's a good chance the restrictions on CEO pay contained in the Stimulus Bill is going to get pulled out in the final bill. Why? Because it might increase the total cost of the bill.

So we need these folks to make millions to help us balance the budget.

I just heard Sen. Hutchison (R-TX) refer to the last time we tried the 'bad bank' model. And she said that was the Resolution Trust Corporation after the S&L Crisis. Well, that's not a 'bad bank' in any way that has any relevance. The RTC took over assets of S&L's that went under, bankrupt, kaput. It then sold off the assets, recouping a lot of taxpayer value but still requiring a lot of government money.

There's not a direct parallel. But the RTC is much more like what's being advocated by those who say let the banks go under and have them temporarily taken over by the government before being sold to private investors. Again, not a perfect analogy since this wouldn't be a liquidation -- at least not entirely -- but more a financial reorganization.

But the fundamental point is the same. The government takes over ALL the assets, good and bad. And after the institutions go under.

Martin Wolf on Geithner's plan ...

Has Barack Obama's presidency already failed? In normal times, this would be a ludicrous question. But these are not normal times. They are times of great danger. Today, the new US administration can disown responsibility for its inheritance; tomorrow, it will own it. Today, it can offer solutions; tomorrow it will have become the problem. Today, it is in control of events; tomorrow, events will take control of it. Doing too little is now far riskier than doing too much. If he fails to act decisively, the president risks being overwhelmed, like his predecessor. The costs to the US and the world of another failed presidency do not bear contemplating.

I'm not sure I agree 100% because I still see this fundamentally as a punt. And as some point out there are kernels in here of what could be a good plan. But I think the fundamental point is right on. Bank bailouts are catastrophic in political terms and much more important, in the Paulson/Geithner model, probably won't work either. That's a bad combination. At some point, Obama owns this.

TPM Reader AN responds:

At what point do you think Obama fans will dispense with this weird fantasy that your reader BR indulges in about what Obama is really thinking and what his real plans are?

I personally am an Obama fan. And I think it makes sense to give him the benefit of the doubt during the period before actual policy is either announced or implemented. But there has to come a point where people stop pretending that Obama is some superintelligent ninjalike political operator who's playing the game at a level the rest of us novices cannot even comprehend and instead start holding him accountable for the decisions that he or his subordinates make.

When Geithner was nominated a lot of people complained that he was a poor choice because he was far too beholden to the big Wall Street players and their interests. Now it appears that he's trying to do everything in his power to protect those very people at the expense of the American tax payer. For better or worse this falls squarely on Obama's shoulders--as it should.

I think people want Obama to be something that perhaps he's not--namely, a strong progressive democrat. Maybe he really is a centrist (and I don't mean a vague meaningless Ben Nelson type) and that's fine. But if a person is hoping for a more progressive president it won't really do any good to pretend that he'd be more progressive if only he could. Sooner or later people are going to have to demand more progressive policy.

It seems that Tzipi Livni's Kadima party may be pulling out a very narrow upset over Netanyahu's Likud. On the other hand, even if Kadima gets the most votes, the exit polls are suggesting parties of the right with just over 60 seats in the Knesset. So it's not clear Livni would be able to form a government even if they win a plurality of seats.

Late Update: Looking a little deeper into these results it's a very weird outcome. It looks pretty clear that Netanyahu 'lost' in that Kadima will probably get two seats more than Likud. But it also looks clear that parties of the right are going to have like 63 or 64 seats. And in a parliamentary system, who wins a minor plurality doesn't really mean anything. That said, if Netanyahu can form a government it seems like he'll come in a substantially weakened state.

Leisure class wingnut posse forming to out Sen. Arlen Specter (R-PA) in primary challenge next year.

In other news, Sarah Palin's cronified Attorney General who was knee deep in her scandals suddenly announces resignation to spend more time ... doing something, not clear what.

We've found our Geithner fan. Floyd Norris of the Times says: "Tim Geithner hit all the right notes in his speech on the new bailout plan today, and as I said last night on the Charlie Rose show, I think it has a chance to work. It is clear that he and his colleagues have given a lot of thought to what failed to work last year, and learned from the experience."

Reich on the Geithner 'plan'.

White House blog liveblogging Obama event in Florida

From TPM Reader BR ...

FDR like Obama came to office with two jobs in front of him - straightening out the banking system and stimulating the economy. He punted for a year and a half on fiscal stimulus. (Very likely he didn't realize what he needed to do, but even if he did he would have been unable to do much.) He was politically dependent on conservative Democrats like Al Smith, John Raskov, Daniel Roper and Lewis Douglas and the interests they represented (e.g., the chemical industry). These people were committed to the balanced budget. After he dealt with the banks, he abandoned the balanced budget and lost political support from the conservative Democrats.

Obama is in a mirror-image political situation. He was elected with lots of support from big financial interests, and he needs to maintain that support to get his stimulus package through. He isn't strong enough right now to win a two-front war against the Republicans and the big banks.

I read this context into this morning's leak to the Times. The only people who know what was said between Axelrod and Obama are the two of them, and I don't think Axelrod would leak without Obama's OK. Obama feels he can't say no to Geithner right now without losing his stimulus package. But he's going to make the bank bailout stand or fall on its own. If it gets shot down, then - with the stimulus passed - he will be in a position to turn to a different strategy.

Watching the Dow is always a questionable metric for evaluating the merits of policy decisions the government announces. But it's worth looking particularly closely at the reactions of financial stocks, particularly bank stocks -- and how the swings in their value are perceived. A real solution to the present crisis probably involves wiping out the shareholders in the bank. So as investors see that on the horizon, if we ever get there, it will only be logical for people to try to unload those stocks.

NYT's DealBook is reporting that analysts at RBC Capital Markets are proposing what looks a lot like a quasi-nationalization proposal.

'Nationalization' is a loaded word. But the key is making insolvent banks face their insolvency, from which a number of steps inevitably follow ...

The analysts, including Jon Arfstrom, Jason Arnold, Gerard Cassidy and Joe Morford, suggest that the solution to the bank meltdown is a tough love approach: The government should seize insolvent banks -- "of any size," they write -- and pool the worst assets in an investment vehicle akin to the Resolution Trust Corporation, which was formed to mop up the flotsam from the savings and loan debacle.

Why such a harsh prescription?

These analysts think that American banks are still carrying far too many assets at inflated prices, and marking them down to more-realistic values would "overwhelm the capital of the U.S. banking system," they say.

Yep, that was a punt.

Perhaps they realized that the situation is too fluid and uncertain to come out with a definitive plan that brings us to the post-Economic Crisis promised land. And they may be right in that regard. But I can't help thinking that this is in some level a punt. Maybe they couldn't actually come to an agreement on what to do. So they came forward with this.

I'll be curious what others make of it.

Late Update: In some ways, I think the stalemate interpretation is the most optimistic one, since it suggests that coming up with a sensible plan is still a future option.

Joe Lieberman trails badly in a prospective 2012 re-election match-up.

Gov. Pawlenty adopts Palinesque foreign policy.

Buried down at the bottom of the Times article on the Obama bailout plan is this short passage ...

Under the category of sticks, private investment managers are closely watching how the Treasury rolls out its "uniform stress test" for grading the health of banks. If the government takes a tougher line with more banks, it could force them to sell off more of their loans and take their lumps sooner rather than later.

Remember, the heart of the problem in the banking sector is not simply that a lot of the banks are probably insolvent, it's that they're not willing to admit it and government regulators are not forcing the point. Specifically, the banks are refusing to recognize steep losses on a lot of bad assets. If this stress test were to force valuing these assets at something like market values that could force the sorts of financial reorganization (i.e., bankruptcy and a period of government ownership) that is probably the only way out of this mess. That's a big 'if'. I doubt that's the plan at the moment. But it's a detail in the plan that might later be built on.

Bank bailout 3.0 rolls out at 11 a.m. ET, and the Senate votes on the stimulus package later today. That and the day's other political news in the TPMDC Morning Roundup.

Well, maybe CNBC was wrong. The Times is saying that it's a bit more of the 'bad bank' after all. And the big story seems to be that Geithner won out against what the Times refers to as "some of the president's top political hands" who wanted tougher controls over the banks and less giveaways for the banks' shareholders.

I think the power of President Obama's presentation tonight speaks for itself if you saw it. (Below I've included his answer to the first question on the economy, which was the essence of the press conference.) There's an important debate about the proper outlines of stimulus bill. But there's little serious debate over whether a large bill, predominantly focused on spending, is necessary. And yet that's what the Washington discussion has been about.

Yet the real key to understanding that press conference is in information that came out earlier today: two polls showing the public is overwhelming on Obama's side in this battle (see Gallup and CNN). According to Gallup, 67% of the public supports Obama on the Stimulus Bill versus 31% for congressional Republicans. 58% of Americans disapprove of the Hill GOP's stand on this issue.

What's most striking about these numbers is the continuing disconnect between the mood of the capital and that of the country. For me, a lot of that is a product of how Washington continues to be wired for Republican control. A president, and particularly one like Obama, is the one person who is in a position to cut through that.

8:13 PM ... Hey, this guy's pretty good.

8:17 PM ... We're going to pull some segments from that lengthy answer to question one. It's really the argument that the inside DC mumbojumbo had not allowed him to make.

8:26 PM ... You watch this performance and you can see that every day Republicans keep this guy off TV is a win for them. Like every great pol, Obama's a great communicator. And he's making the argument.

8:37 PM ... Key passage from Obama's answer to question one. Nice dig at the FDR revisionists ...

Not long ago it seemed a given that the Obama bank rescue plan would be on the 'bad bank' model -- i.e., you and I as taxpayers create what might more aptly be called a 'suicide bank' where you go to all the other banks and buy their poor investments at prices those banks wish they were still worth. Then, when that just seemed too silly it was going to be a plan to insure the banks against excessive loses on these bad investments. Sort of the slo-mo version of the bad bank. But CNBC is now reporting that the 'bad bank' is out. And they add these details ...

The Obama administration's wide-ranging plan to stabilize the financial system no longer includes creating a "bad bank" but will still contain measures to buy up toxic assets from financial institutions, according to a source familiar with the plan.

In addition, funding for the bank-rescue plan is unlikely to exceed the $350 billion currently available under the TARP, this source said.

So the 'bad bank' is out. There's some vague talk of buying back 'toxic debts'. But if I'm reading that right they're not going to be asking for any more money.

As the same source tells CNBC, "They have to have enough to calm the markets, but there might not be as many details as previously thought." I'd say that's an understatement.

Obviously, we'll know more details tomorrow with Geithner's speech (or maybe not). And I'll be very curious to see what others make of this. But this sure sounds to me like they've decided to punt. No big new plan. And no more money.

I wonder if what's happening here is that they realize that none of these TARP-like workarounds are going to work. So no point asking for a politically and perhaps fiscally debilitating amount of money on something they'll have to abandon in six months. But they also don't have their ducks in a row yet, or haven't come to grips yet, with something more like the Swedish model -- which is to say, letting failed banks actually fail, government takes them over like has been happening to little banks, government runs the bank for a while and then sells it to private investors. Regardless, at least from CNBC's discussion it looks like a big punt.

TPM Reader JC sent me to this interview with Nouriel Roubini and Nassim Taleb on CNBC. Here's what JC wrote: "In this clip, Nouriel Roubini and Nassim Taleb are still being treated as a circus sideshow by CNBC... They're predicting the end of finance, and offering the only clear path out of this mess that I've seen offered (with the knowledge to back it up), and CNBC keeps asking them for stock tips. It's ludicrous. Wall Street media -- CNBC at least -- doesn't realize how bad this is yet. They're stuck in a bubble where they think everything will go back to normal in a few months...."

He hits it spot on. These two guys are talking about a deep structural crisis in the world economy. And these CNBC yahoos can't stop asking for stock tips. Really surreal.

I'm watching it again now. This is a seminal piece of video. You have to see it. I'm not sure I've seen anything that captures -- albeit unintentionally -- the vast disconnect over what is happening today in the US economy.

TPMtv caught up with Robert Reich, former labor secretary and UC Berkeley professor. He gives us his take on the stimulus package ("Pretty good... Maybe not an A but an A minus") and talks about how the financial crisis has to be taken as an opportunity to do more than simply get us back on the old track: "That track is filled with potholes and it's going to eventually be so slippery we fall off the cliff again."

Obama reaffirms Bush stance on state secrets privilege.

RNC Chief Michael Steele says the people who'll get relief from the Stimulus Bill are just looking for a little "bling bling".

How do you wrest control of the banking industry away from the vested elites who got us in this mess? Former IMF chief economist Simon Johnson makes the fascinating point that breaking the back of the elites is a critical stage in crisis resolution in developing and post-communist countries -- a stage we have yet to go through in confronting our own crisis:

The elites who run the US banking industry have had a great run of economic good fortune. They used this wealth to further strengthen their political power, both through donations to politicians of almost all stripes and more broadly through taking positions of formal and informal influence throughout the executive and legislative branches.

Our unsustainable debt-fueled boom, in other words, produced both the conditions for a major global financial disaster, and a political strengthening of the people who benefited most from the risk-taking and associated compensation packages that made this disaster possible. Ending the financial crisis is relatively straightforward - a forced recapitalization and change of ownership/management in the banking system - although this will not immediately lead to an economic recovery ... But seen in deeper political terms, decisive action to restructure large banks is almost impossible. Such action would require overcoming perhaps the single strongest interest group in the United States today.

How can you do it? The answer must be by splitting this powerful interest group into competing factions, and taking them on one by one. Can this be done? Definitely, yes. In particular, bank recapitalization - if implemented right - can use private equity interests against the powerful large bank insiders. Then you need to force the new private equity owners of banks to break them up so they are no longer too big to fail.

I'm preparing to do one of our video interviews with Johnson later today, and I'm eager to explore the political economics of the bank bailout with him. I should add that Johnson is not optimistic that the plan Geithner is set to roll out tomorrow is the back-breaking proposal we need.

Gov. Crist (R-FL) is joining Obama at his Stimulus Bill event in Florida tomorrow.

Zack Roth unpacks the allegations involving payments from RNC Chairman Michael Steele's 2006 Senate campaign to a company run by his sister.

Tomasky: "I love the smell of stimulus spending in the morning. It smells like ... victory."

Calling Obama's new bank rescue plan a "plan" may give Geithner Summers et al. too much credit. Floyd Norris notes in today's NYT (my emphasis):

Details of the new plan, which were still being worked out during the weekend, are sketchy. And they are likely to remain so even after Treasury Secretary Timothy F. Geithner announces the plan on Tuesday.

That's reassuring.

Obama is on the road selling his stimulus plan today before heading back to DC for a primetime news conference. That and the day's other political news in the TPMDC Morning Roundup.

Not unlike some of our venerated financial institutions, the Council on Foreign Relations seems to have gone long on right-wing cranks just as the market for them has plummeted.

On Friday we interviewed Nobel prize-winning economist Joe Stiglitz for an upcoming episode of TPMtv. It was very clarifying on a numbers of topics. And it confirmed for me everything I'd thought to this point about the first and now (soon-to-be-announced) second bank bailouts. It now seems like we're going to go the 'bad bank' route. Only instead of buying the crappy assets at inflated values (to absorb the bank's loses for them), we're going insure the assets so we can absorb the losses dribbled out over time.

Many, perhaps most, of these big banks are insolvent. But they refuse to recognize it. They insist that these 'toxic assets' are worth much more than anyone is willing to pay for them. Stiglitz's argument is that this is really a zero sum game over who picks up this tab -- the banks, their shareholders and bondholders or the taxpayers. A far better approach is take these banks through some sort of structured reorganization, something like bankruptcy, though probably it would need to be customized in some ways given the scale of the institutions and the larger issues involved. Feds take over the bank (just like they routinely do when little banks fail), run it until things stabilize, then sell it to new investors.

That's 'nationalization', I guess. But it's really not any different from what we did with IndyMac. And that worked out okay. We even found some people to sell it to.

Taxpayers are already providing these banks with far more dollars than the markets say they're worth. So there's really no way to get a good deal for the taxpayers without owning the institutions more or less outright. The math just doesn't work. So we get more and more convoluted ways of structuring bad deals for the taxpayer to avoid temporary public ownership. As Krugman put it a few days ago, "the Obama administration appears to be tying itself in knots to avoid this outcome."

What's as troubling as the big rip-off of taxpayer money is that what Obama's attempting on the side of rebuilding the real economy could founder on the public backlash against what looks like a very misguided way to get a handle on the banking crisis.

We'll be bringing you the Stiglitz interview soon.

My mother-in-law mentioned this story to me today. But I hadn't heard about it. ABC has put together a major piece on a woman who ran an escort service servicing Wall Street, much as the late DC Madam did down in DC. And just they did in the earlier case, Brian Ross's investigative unit at ABC has gotten the women -- who's now out after serving three months in prison -- to share her book of addresses and names of clients.

Back in that earlier case, beside netting the oafish Sen. David Vitter (R-LA), the list never really yielded the kind of names people thought it might. But the hints from Ross suggest the catch in this case might be quite a bit larger.

Now, what private individuals do with their own money is one thing. But in this case, the MO seems to have involved serious tax fraud, because the extra benefit with this escort service was that they'd bill it to you as various sorts of business expenses -- construction, cleaning, accounting, etc. So basically you could give the taxpayer the same treatment as the escort.

I found this video of one of the segments on youtube ...

A lot of readers see what Collins, Nelson, Specter et al. are doing in the worst light. Nelson as a turncoat. And Collins, Snowe and Specter diluting the Stimulus Bill to no good end. On the policy merits, I completely agree. As many others with greater grasps of the budgetary and economics particulars have argued, the list of cuts they've pushed through follow no coherent approach to the package -- and build up the least effective parts of the package at the expense of the most. They follow a logic of political grandstanding.

But one of the biggest outside, labor-liberal groups pushing this bill, Americans United for Change, is out in these states running new ads this weekend in support of Collins, Specter, Snowe and Nelson.

GOP opposition gets louder as passage of a stimulus compromise becomes more likely. That and other political news in today's TPMDC Sunday Roundup.