Don't let your two year old play with your iPhone if it's enabled for Twittering.

(credit: AFP/newscom.com)

I've been highly critical of the government bailout of AIG. But the new spectacle of the company paying $100 million in bonuses to executives, even over Secretary Geithner's objections is an example of what's wrong with it.

First, lest there be any confusion, we're not talking about bonuses for executives at the conventional insurance providing divisions of AIG. We're talking about $100 million in bonuses for executives at the company's Financial Products division, the shop in London that wrote almost half a trillion dollars of credit default swaps (in effect, unfunded de facto insurance policies on wildly overvalued assets) -- the ones that caused the company's death spiral and put taxpayers on the line for what will likely eventually be a quarter trillion dollar price tag.

So Secretary Geithner told AIG CEO Edward Liddy that the these bonuses would not fly. Liddy said: sorry. We're contractually obligated to pay these bonuses. And if we don't we could open ourselves to legal liability. We could get sued.

Now, as a narrow legal matter, I don't doubt there is a contractual obligation. But bankruptcy disrupts contractual obligations. I'm actually not sure where employees with contractual bonuses come in line in a bankruptcy proceeding. But I bet it's really far toward the end of the line. And in business terms AIG was bankrupt. Not just bankrupt but driven to bankruptcy entirely by the division that these execs work at. It is only because -- rightly or wrongly -- the government believes that allowing AIG to founder would threaten the entire economy that we have agreed to let the taxpayer take the hit for all these reckless actions.

So on the business merits, they're bankrupt. But we decide it's in the national interest to prevent formal bankruptcy. And these sharks -- not everyone at AIG, but the execs that created this mess -- use that as a lever to get paid the money they never would have seen if we'd let (market) nature take its course.

Republicans complain about partisanship when Obama says he's inherited problems from the previous White House. That and other political news in today's TPMDC Saturday Roundup.

If you remember, not long after President Bush became president, we had that incident with the US spy plane hugging Chinese airspace, which was bumped by a Chinese jet intercepter and forced to make an emergency landing on Chinese territory. Then just days ago we had a strangely similar incident at sea. Again, just a few months into the tenure of a new president.

Now we have Chinese Prime Minister Wen Jiabao publicly worrying about the safety of the almost $1 trillion of US Treasuries China owns. That they'd have some concern isn't surprising. But having the head of government sound the warning bell is hardly the best approach to preserving confidence in US debt.

This strikes me as all of a piece, pretty unsubtle signaling of a shifting balance of power.

Certainly, it is worth noting that China's export driven economy and massive build up of capital reserves were the fuel behind the US housing bubble. And China's own continued growth is dependent at least for now and for some time into the future on a very receptive US market for its goods. We're in a toxic but mutual embrace.

Announcement just out from the Justice Department:

In a filing today with the federal District Court for the District of Columbia, the Department of Justice submitted a new standard for the government's authority to hold detainees at the Guantanamo Bay Detention Facility. The definition does not rely on the President's authority as Commander-in-Chief independent of Congress's specific authorization. It draws on the international laws of war to inform the statutory authority conferred by Congress. It provides that individuals who supported al Qaeda or the Taliban are detainable only if the support was substantial. And it does not employ the phrase "enemy combatant."

We're all talking a lot about CNBC today after the boffo drubbing Jim Cramer took last night on the Daily Show. As an aside, as big of a clown as Cramer has been and as wildly hyperbolic as many of his recent comments have were, I'll give the guy props for agreeing to go on the show where he certainly knew he was going to get sliced and diced, though perhaps not that sliced and diced. But back to CNBC.

As the economy has moved front and center, probably all of us are reading and watching a lot more financial news. It now runs regularly on our bank of TVs here at TPM HQ, whereas we used to be more focused on the regular cable news nets and the CSPANs. But there are somewhat unique advantages CNBC operates under. To the best of my knowledge CNBC is not part of the news division at NBC. It's part of the division that runs cable broadcasting. MSNBC is also one of their cable channels; but they report up through the news division. As you can see here, CNBC President Mark Hoffman reports to NBC Universal's Jeff Zucker, not Steve Capus, the president of NBC News. So they're in with Bravo and the rest. And they're under no pressure from the News division to provide editorial objectivity or balance or any editorial standards at all (*). And I mean, half of it is Jim Cramer and Larry Kudlow. So that's pretty obvious.

The other point, which is both obvious and worth stating, is that CNBC's business model is not reporting news for average folks or even average investors. While the channel makes good money, it ratings are actually pretty low. The whole model is based on who the audience is -- brokers, financial professionals and folks with big money on Wall Street. So of course it's heavily biased toward that viewership.

Not that there's anything wrong with that. Big dollar investors deserve their own cable channel too. But as more of the 'news' moves into CNBC's 'space', it's worth considering how deeply skewed their reporting is.

(ed.note: * -- Obviously, this does not mean that they don't apply their own editorial standards. Just that they're on their own in that regard and not on any kind of leash from the news division which might provide some push back to their right-wing tilt or singular focus on Wall Street as the determiner of what's good or not for the economy.)

Closing arguments just finished up in the Minnesota election contest trial. Eric Kleefeld reviews the Franken closing. More soon on Coleman's closing.

Late Update: Kleefeld runs down the closing Norm's lawyer gave. My experience is that lawyers use adolescent flattery on judges when they don't have much of a case (which always struck me as just reinforcing to the judge that they have no case). Lot of that going on in the Coleman closing argument.

Greg Sargent has an interesting little scoop here. SEIU's Andy Stern is hinting that that SEIU might endorse Arlen Specter next year if he supports EFCA. And reps from the AFL-CIO have suggested the same.

In one respect this isn't that surprising. Specter has a decent relationship with labor. He actually voted for EFCA back in 2007. And they've endorsed him before. But implicit in Stern's statement is that that they will most definitely not be endorsing Specter if he ends up pulling his support from EFCA. And these are not ordinary times for Specter.

Specter only barely managed to secure the Republican nomination in 2004. And that was with the strong support of a then popular (at least with Republicans) president. The GOP has now taken a hard turn to the right -- especially on fiscal policy. And Specter has either made his bed or his grave (depending on your point of view) by providing the crucial vote for the president's Stimulus Bill. Though he'd probably be the favorite in a general election match-up Specter now faces an uphill struggle to get the Republican nomination. It's even been credibly argued that switching parties is the only credible chance Specter has to remain in the senate.

So there's definitely a 'make your choice, choose sides' push behind Stern's comments. If Specter has intense opposition on his right and committed opposition from labor at the same time, it's really hard to see how he gets through.

A lot of the fate of climate change and health care legislation this year will come down to whether the Democrats decide to push this legislation through using budget reconciliation. That will determine whether the Dems need 50 votes or 60 votes to get the legislation passed -- in other words, whether the Republicans can filibuster. Today, 8 Democratic senators joined Republicans in a public statement saying the Dems should not try to push that legislation through on the 50 vote rules, which makes it much less likely that either will pass.

In the second part of my interview with IAVA founder Paul Rieckhoff, he assesses the current state of physical and mental heath care for returning veterans, six years after the invasion of Iraq:

Florida GOP chairman demands that Republicans give "unwavering loyalty and support to Chairman Steele" in his time of need. I thought "unwavering loyalty and support" to George W. is what got them in this mess, but anyway ... That and the rest of the day's political news brought to you loyally and unwaveringly in the TPMDC Morning Roundup.

In case you missed it (speaking for myself, I was watching UCONN-'Cuse 6 OT madness), here's the unedited Part III of the Jon Stewart-Jim Cramer showdown. By this stage in the interview, Cramer is a whipped puppy, and Stewart has long since dispensed with any comedic effect, morphing into a basic cable Howard Beale:

The rest of the Cramer interview, in all its unedited glory, here.

I know these things are not straight confessions of the heart. An allocution in such a high stakes case is closely lawyered. Nonetheless you might find it interesting to take a moment to read the text of Bernie Madoff's statement today in court confessing to and detailing his crimes. I did.

Six Flags on brink of filing for bankruptcy protection.

You know who that guy is? That's Joseph Cassano. As far as we know this is the only commercially available photo of him. AIG was actually a decently run and profitable insurance company. The problem was a small shop in London, AIG's the 'financial products' division. Cassano ran it. And that's where they wrote more than $400 billion of credit default swaps, mainly on crap mortgage debt. That means about $400 billion of de facto insurance policies he wrote that his company had no assets to cover. Great idea, right?

But don't worry: that's where your money is going now.

Cassano is the guy at the center of the AIG implosion. But of course he couldn't bring down the global economy alone.

Click here to see Cassano and the rest of the Weasels who tanked the world economy in our Axis of Weasels: The Men Who Ruined the Economy photo gallery.

Lisa DePaulo went on MSNBC this afternoon to discuss her much-linked GQ interview with Michael Steele. She, too, couldn't believe some of the things he was saying:

Pretty sure this isn't the help Michael Steele is looking for:

As of this morning, Steele was continuing to insist he's pro-life.

See more at MSNBC.com.

Obama directly confronts the "Obama-too-busy" meme (as chronicled by our Matt Cooper) in his speech this afternoon to the Business Roundtable:

See more at CNN.com.

Family Research Council President Tony Perkins tells TPMDC's Eric Kleefeld that Michael Steele has the GOP on the way to being a big empty tent.

From the Austin American-Statesman ...

Gov. Rick Perry will announce today that he is blocking the state from accepting $550 million for expanded unemployment benefits as part of the federal stimulus package.

With an upscale Houston hardware store as his backdrop, he will paint the expansion as a burden on small business.

Looks like Norm Coleman's campaign did just about everything you can do wrong in failing to protect the credit card information of his contributors from hackers. Heck, they weren't even hacked -- they simply didn't protect the data from someone just surfing the web.

If you're the governor and a prominent black congressman from your state says refusing to take stimulus money will disproportionately hurt black citizens of your state, would you turn around and compare the stimulus plan to the economic policy of ... Zimbabwe?

Only if you are Mark Sanford (R-SC).

Not a good day so far for Michael Steele. Let's round it up.

Tony Perkins of the Family Research Council is aghast at Steele's apparently pro-choice comments to GQ, comments which Steele has tried to walk back.

Ken Blackwell, Steele's former rival for RNC chair, saw fit to chime in, saying Steele "needs to get to work -- or get out of the way."

Mike Huckabee called Steele's pro-choice comments "a violation of the most basic of human rights."

GOP dirty trickster Roger Stone tells TPMDC that the GQ interview was "one more nail in the coffin" for Steele.

Even if Steele were to immediately cease sticking his foot in his own mouth, are there any other ticking time bombs like the GQ interview that have yet to go off?

Is Arlen Specter going to be the GOP's Joe Lieberman?

Check out our photo gallery of some of the most notable men (and they are all men) behind the collapse of the financial system.

We're compiling the best of the steamy text messages from and to former Detroit Mayor Kwame Kilpatrick, and we'll be bringing you those tomorrow. But there's still time to email us with your favorites from the 6,000 texts that were released earlier this week.

As I said last night, I think Michael Steele's forgetting that he's pro-life in his interview with Lisa DePaulo may finally bring some GOPers off the sidelines and pushing to get this guy to step down. You're going to get Christian conservatives saying that he should go, presumably. But I think you're going to get others who just want an end to the embarrassment. So keep an eye out if you see news reports of people calling for him to step down and please send us the links.

The FBI this morning raided the office of the chief technology officer for Washington, DC, who, until a few weeks ago, was Vivek Kundra, since appointed by President Obama to the newly created position of federal chief information officer. But so far it looks like Kundra is not the focus of the raid. Another employee has been arrested in the office as part of a federal bribery sting.

TPM Reader JC observes same thing I see:

I just wanted to pass along an observation. I think that with a lot of Michael Steele's gaffes, he seems to say whatever he perceives to be the opinion of the person to whom he is speaking at the moment. Then later he has to backtrack because it doesn't match the conservative orthodoxy. Take a look back at all the misstatements he has made and to whom he has made them. The man is a mirror. He just reflects back what he thinks you want him to say.

We've all met people like this (there's some of this trait in all of us), but it's a personality type that's especially prevalent in political circles. Steele is a particularly hard-core example of the type, and while it's fun to watch on a political level, on a personal level, I've started feeling sorry for the guy.

Michael Steele walking back the dog: No, no , NO! I am pro-life! That and the day's other most entertaining political news in the TPMDC Morning Roundup.

Ever since I read Michael Steele's trainwreck interview with GQ that came out yesterday, I've been wondering, he thought this was a good moment to give a let it all hang out interview?

Remember, this is the one where he appeared to forget in real time what his position on abortion was, took dangerously sane positions on homosexuality and told interviewer Lisa DePaulo that he was a fan of Frank Sinatra and the 'Pack Rats'. Steele appears to say that he thinks abortion should be the choice of the woman, notwithstanding always saying before -- and even in the same interview -- that he's pro-life.

So what was he thinking?

Well, I've talked to the folks at GQ. And they confirmed to me that the portion of the interview about abortion was conducted on February 24th. So a bit more than three weeks ago and just a few days before his ill-fated media critique of Rush Limbaugh on February 28th.

So basically, during his last two weeks of self-inflicted destruction this latest doozy has been sitting on Lisa DePaulo's tape recorder or on some GQ editor's desk waiting to, perhaps, inflict the final blow.

Special Bonus Snark: As Eric Kleefeld wrote about Steele's discussion of rap music, Frank and the 'pack rats': "So Steele doesn't just sound like a middle-aged man trying to talk to his kids and failing to sound cool. He's also trying to talk to his parents and failing to sound cool."

As I think about this new Steele goof with his answer on the abortion question, I really wonder whether this might be the straw that broke the camel's back, though that camel's in pretty bad shape as it is. I think you can probably be pro-choice or pro-life and be head of the RNC. But given all the antics from Steele over the last few weeks, I'm not sure it's sustainable to not be sure or to be so all over the place that you seem to switch sides during a single interview.

Here you can see Michael Steele trying to figure out whether he's pro-choice or pro-life ... with a tape recorder running.

Also, will Steele beat the Roberts' record for shortest RNC Chairmanship ever? Matt Cooper discovered that the current record holder appears to be Sen. Pat Roberts' (R-KS) dad, C. Wesley Roberts, who was chairman for four months in 1953 before a reporter discovered he'd collected a $10,000 commission on the sale of a hospital the state of Kansas owned. Good times. I wonder if Steele can top it.

From Lisa DePaulo's interview with Michael Steele, asking him to explain his pro-life views ...

DePaulo: Are you saying you think women have the right to choose abortion?

Steele: Yeah. I mean, again, I think that's an individual choice.

We'll all spend the rest of our lives watching the former Bushies spinning wildly for their man's legacy:

The TSA is "reviewing" the David Vitter airport rage incident.

Katon Dawson, Michael Steele's crypto-segregationist challenger for the RNC Chiefdom, denies plotting against Michael.

My old pal Lisa DePaulo interviews the man of at least the next few weeks Michael Steele.

If the GOP wants to boot Michael Steele, what would they have to do to fire him? Matt Cooper takes a look at the rules.

From TPM Reader JL ...

I've been involved in the financial services industry for 20 years, most recently as an investment advisor. I've been following the whole nationalize/don't nationalize debate closely. My bias has been toward more aggressive action rather than less. Like many of your readers I've been quite disappointed with Geithner's caution on the issue.

With that as background, I wanted to share some thoughts on Citigroup's memo to clients. First though, bear with me as I walk through some math.

Let's focus on those banks undergoing the stress tests and look at them in aggregate The key questions are: 1) what are the remaining losses embedded in their securities and loan portfolios? 2) how much of that can the banks make up for through operating earnings? 3) what's left over for the taxpayer to cover through capital injections?

As a starting point, let's use Nouriel Roubini's January estimate of $3.6 trillion in ultimate losses from U.S. loans and securities. Roubini estimated that U.S. banks & broker-dealers would absorb $1.115 tn in losses on unsecuritized loans (residential mortgages, commercial mortgages, credit cards, etc.) and $629 bn on securities (CDOs etc.). I would guess the banks in question will absorb about 90% and 80% of those two figures respectively (the remainder would fall to smaller banks and to standalone broker-dealers). Applying these percentages give losses of $1.458 tn. Of that, let's assume 90%, or $1.312 tn, will be realized over the next two years.

Of the $1.312 tn, around $480 bn or so has probably been written down ... $400 bn on securities, and $84 bn in loan charge offs. In addition, loan loss reserves are around $120 bn and serve as an additional buffer. Bottom line, around $700 bn needs to be covered by future operating earnings or further capital injections. That $700 billion represents around 7.7% assets.

Now we come to Citi's memo. Per Citi, pre-tax earnings before write downs for the first two months were around $11 billion. Annualized that comes to $66 billion, or 3.3% of assets. If these numbers are accurate and sustainable and applied to the banks as a group, they could cover the vast majority of the 7.7% in 2009/2010 losses through operating earnings. Extending the math, the taxpayers would only have to cover 1.1% of assets or an additional $100 billion.

Now, I'm not sure how sustainable that 3.3% is and how applicable it is to other banks. But, it does suggest to me that further capital injections might be more in the range of $150 to $250 bn rather than the $200 bn to $400 bn I might have offered up a few days ago. Is that a big deal? I think it may be. For Citi, it could mean that there's something material left over for current shareholders. For BofA it could mean that they more or less muddle through, perhaps with more taxpayer money, but without majority government ownership. And, maybe JPMorgan Chase and Wells Fargo are ok.

I'm not sure about any of this (nobody is), but I'm definitely a bit more optimistic about the banks than I was before Citi's memo. And, that hasn't happened in a long time.

You just can't trust this Eric Cantor guy as far as you can throw him. He's still on TV repeating that discredited 'scoring' of the House GOP stimulus bill, which contained the fairly preposterous claim that their version would create twice the jobs at half the price even though it contained close to no stimulus spending ...

On this basis, he seems like a good candidate to be the new King of the GOP.

New Poll: Everybody hates Rush but Republicans.

With Michael Steele apparently swirling down the bowl, who should the next chairman of the Republican National Committee be?

Send us your entries. For my part, I'm nominating Norm Coleman.

Vitter: I was just having a "conversation" with that airport employee.

Coleman campaign puts all its online donors' credit card info up on the web.

But they didn't tell anyone until a watchdog site sniffed it out.

Stephen Labaton has another article in the Times about banks that are fed up with federal meddling and deciding to give the Feds their money back. He makes the decent point that forcing weak banks to ease the terms of the outstanding loans may have the unintended effect of making the weak banks even weaker and pushing the federal government deeper into propping them up. And the article, implicitly, shows one real truth about the banking crisis, which is that a lot of the smaller regional banks are in decent shape -- and are thus capable of paying the money back, as a few have.

But I think he's either giving too much credit to, or perhaps has been taken in by, Goldman Sachs and Wells Fargo, who have also made unconvincing noises about wanting to give the money back.

Here's the key passage ...

Some bankers say the conditions have become so onerous that they want to return the bailout money. The list includes small banks like the TCF Financial Corporation of Wayzata, Minn., and Iberia Bank of Lafayette, La., as well as giants like Goldman Sachs and Wells Fargo.

They say they plan to return the money as quickly as possible or as soon as regulators set up a process to accept the refunds. On Tuesday, Signature Bank of New York announced that because of new executive pay restrictions in the economic stimulus package, it notified the Treasury that it intended to return the $120 million it had received from the government only three months ago.

The key is 'as quickly as possible'. A number of small banks are able to give the money back, because their balance sheets are in decent shape. But that doesn't apply to any of the big banks, including Goldman and Wells Fargo, even though the latter especially seems in relatively better shape than Citi and BofA. Through direct infusions and the bailout of AIG, Goldman is in no position to swear off the federal government's extraordinary assistance. Thus, their current policy of whining, claiming they're going to give the money back and then saying, more or less, 'we'll get back to you on that' when anyone asks when.

You've probably seen Paul Rieckhoff's shaved dome on the cable nets at one time or another. He's an articulate and engaging spokesman for U.S. veterans of the Iraq and Afghanistan conflicts in his role as founder and executive director of IAVA.

I wanted to talk to Paul, himself an Iraq War veteran, about a spate of recent news stories on the struggles veterans are facing, from a spike in suicides among soldiers to new evidence on how widespread traumatic brain injuries are among this generation of veterans. And we'll bring you that part of our interview later in the week.

But we ended up also talking at some length about President Obama's deployment of additional troops to Afghanistan even before he's articulated our strategic objectives there, let alone mapped out a strategy. Paul has some smart things to say about that, too:

A fun catch from our video wizard Ben Craw this morning on MSNBC. Mika Brzezinski went on at length bemoaning, rightly I think, the overuse of the analogy of the economy as a sick patient -- except someone forgot to give Tom Brokaw the memo:

Almost the entire Republican political strategy in 2009 has been to stipulate to President Obama's popularity and get to work breaking down the popularity of "Congress" in general and congressional Democrats in particular. President Obama, after all, isn't their problem for a few years. 2010 is against their Democratic opponents in the Hill.

As I've noted on several occasions this year, the very poor approval numbers for 'Congress', which are so often noted by congressional Republicans, stand in stark contrast to the poll numbers for congressional Democrats, which have been pretty strong and vastly better than the numbers for Republicans.

But now, according to Gallup, we have a genuinely stunning surge in approval for Congress. Right? Who knew ... Approval of Congress is up to 39%, a twenty point gain since January.

Most of the increase comes from Democrats. But not all. Since January, approval for Congress among Independents has risen from 17% to 34%.

Obama and the congressional Democrats have their jobs cut out for them -- probably a more difficult set of challenges than any national politicians have faced in a generation, if not a few generations. But thus far every significant bit of polling data shows the Republicans' opposition is failing abysmally.

Sen. David Vitter (R-LA) flies into airport rage over missed flight.

What a guy.

Let the piling on begin! Michael Steele is facing heat from Sen. John Thune (R-SD) for the slow pace of staffing up at the RNC. That and the day's other political news in the TPMDC Morning Roundup.

It's not on par with Kennedy-Nixon, Ali-Frazier, or Federer-Nadal. It's more like the feuding cheerleaders in Bring It On. But I still feel kind of privileged to have the opportunity to watch the Jon Stewart-Jim Cramer spat:

Late Update: In case you hadn't heard, Cramer will be a guest on The Daily Show on Thursday.

The man who led the campaign against the Chas Freeman appointment is currently awaiting trial on charges of espionage.

The Post has a nice, short history, going back a century, of Citibank's record of going for broke and ending up broke.

GOPers are telling Taegan Goddard that Steele may face a no-confidence vote after the NY-20 special election on March 31 -- win or lose.

More importantly, how much more humor can Steele produce over the next three weeks?

And more trivially, has an elected party chairman ever had such a brief tenure?

And will Steele be able to blow all the money on the new website before the end of the month?

Hans von Spakovsky resurfaces helping disfranchise voters down in Texas.

Congress approves $410 billion omnibus spending bill.

Sen. Schumer reacts to foundering of Chas Freeman appointment with characteristic class and polish.

All 6,000 of the steamy text messages that got former Detroit Mayor Kwame Kilpatrick in such big trouble have been released. You can help us pick out the best ones over at TPMmuckraker.

Fun times for senators from Arkansas.

From MarketWatch ...

Citigroup Inc. lowered its rating on Wal-Mart Stores Inc. to hold from buy on Tuesday, citing concern that legislation intended to make it easier for employees to unionize would raise the retail giant's labor costs and hurt its competitiveness.

Kos has a post up saying that it's wrong to think that EFCA needs 60 votes rather than a mere 50 votes, figuring that several senators will vote against EFCA on the actual bill but vote for cloture (where the 60 rule actually applies.) That's what Lieberman did on Alito, for instance.

Kos has a much better handle on vote-counting and the mechanics of these kinds of things than I do. And I hope he's right because EFCA is extremely important. But I'm not as optimistic as he is that 60 isn't the threshold. Two of the key votes are Lincoln and Pryor from Arkansas, a very lightly unionized state where Walmart is headquartered. Walmart doesn't care about optics on this. This is the real deal for them, as the Citigroup downrating makes clear. I don't see them being thrown by pulling a Lieberman and voting 'wrong' where it counts and 'right' where it doesn't count.

That works in a case where the audience is voters. So for instance, if a really unpopular bailout bill comes up, I could see a lot of senators voting for cloture but not having the stomach for the real vote. Because what you're worried about is mass opinion and 30 second tv ads. But this isn't like that. For the Arkansan senators, this is a constituency of one. And for other senators, it may be a little less clear since there's not one dominant company. But there are still key businesses that this means a lot too.

For the folks these senators are worried about offending, ticking off -- those people are hip to how the procedural niceties work. And they want to know who their friends are.

I'm glad everything's better now.

TPM Reader DC unleashes his inner rant:

I was watching the segment with Jim Cramer on Morning Joe while getting ready for work this morning and I must say I don't think I've ever yelled at Morning Joe (or any tv show for that matter) as much as I did this morning.

First of all, it was obvious that nobody there had actually watched The Daily Show last night or anytime recently. Joe repeatedly says that Jon Stewart would always rip on Bush but now that Obama is in office he will not make fun of the President so he must go after people "in the arena," aka Cramer. If any of them had been watching Daily Show last night or any other time recently they would have seen many segments making fun of the new administration and the Democrats in Congress. I am a huge Obama supporter and a lot of these bits on the Obama Administration have really made me cringe with embarrassment but nevertheless it's still hilarious. What they don't understand is that the Daily Show makes fun of people being stupid/hypocritical regardless of political or ideological affiliation (it just so happens that the Republicans and Bush have been so stupid and on center stage for so long that they gobbled up all of the attention).

Second, Joe and Jim seem to think that Jon Stewart is just showing clips of CNBC and Cramer being wrong as part of an ideological battle to prove that liberals were right and conservatives/capitalists were wrong. They are simply wrong. The point of the segments is to point out that the folks at CNBC have been extremely reactionary to the daily ups and downs of the Dow they have been extremely critical of the President for not turning the stock market around within his whopping 50 days in office so far. Not only have they failed to offer any coherent alternative solutions, but their panicked reactions and non-stop criticism have contributed to the markets downward spiral.

Finally, the most important thing to take away from the Daily Show segments is that CNBC is very far from Journalism or news. It is a propaganda machine created to get people excited about the stock market and to BUY BUY BUY!! CNBC was a major contributor to our detrimental culture of day trading, expectations of immediate returns, expectations that the market would continue to grow and the bubble would never burst, and a loss of any sense of risk in investing.

So, CNBC was never an independent news/journalism source, nobody there saw the storm clouds gathering until it was too late, and now, nobody has constructive answers for what to do and their increasingly negative coverage of the President and markets only exacerbates the problems. With this track record, what use is CNBC to anyone why should we care what they have to say?

I just hope the Daily Show is cooking up another gem for Joe and Jim tonight!

From the Courier-Journal ...

Sen. Jim Bunning, R-Ky., has conducted a poll on his 2010 bid for election to a third term, but he isn't making the results public.

"Let's say I did the polling," the senator told reporters on a conference call this morning.

What does that mean?

"That means it's none of your g--d--- business," Bunning said, who then followed up with a laugh. "If you paid the 20 grand for the poll, you can get some information out of it."

From TPM Reader JG ...

NBC is working full time to build up the John Stewart - Jim Cramer thing. While Cramer is loud and obnoxious (a totally easy target), the tone of NBC has become increasingly negative towards Obama. Call me paranoid, but Jack Welch establishes the talking points at NBC, and Welch can be regularly seen on "Morning Joe" laying down the law as to what should be done.

The real point is that GE stock has tanked, and Welch acknowledged the other day that his personal holdings (mainly GE) has tanked. The man is looking for a bailout. They would like to focus on the shiny object (Cramer) and ignore the constant barrage of Scarborough, Mika, Barnicle, the sweater girls from CNBC, and the rest of the cast bombarding Obama.

MSNBC at least has been pretty friendly territory for Democrats of late, at least at night. So I don't know if this isn't a bit of a partial view. But GE, which is NBC, is deeply implicated not just in the broader financial crisis but in various bailouts as well. So the whole issue is worth considering.

Obama finally got it right!

These have got to be the two whiniest grown men on television. Jim Cramer and Joe Scarborough wimpering over Jon Stewart beating them up and taking their lunch money:

From TPM Reader MD ...

I find it interesting that reader RB makes a moral distinction between bondholders and derivative counterparties.  As if derivative counterparties are degenerate gamblers playing fast and loose with other people's money while bond investors are upstanding patriots. Derivative counterparties are insurance companies, Universities, other banks, hedge funds, corporations, state and local governments, etc... Bondholders are insurance companies, pension funds, other banks, corporations, money market funds, mutual funds, etc... One group does not look that different from the other. Both were just playing by the rules as they were and pursuing their own financial interests. Demonizing derivative counterparties is just silly.

Also, what is missing from these recent discussions about the repercussions of Lehman's bankruptcy was the effect it had on money-market funds, particularly the Reserve Fund which "broke the buck" shortly after Lehman's bankruptcy because the fund was holding commercial paper issued by Lehman brothers. Once this happened, there was essentially a bank run on money-market funds and the debt capital markets froze for about six weeks. Citi is much larger than Lehman was so I think people are afraid of this happening again but on a much grander scale.

So unfortunately I think taxpayers would for the greater good want to guarantee the liabilities of Citi if they were put into receivership or nationalized or "pre-privatized" or whatever. Hopefully, the current administration is figuring out what this would cost and if there were a way to guarantee a portion of the liabilities and prevent a credit market collapse. There could be a way of giving bondholders a "haircut" so they see some loss of principal but not so much so that it would cause panic selling.

What they need to do is at close of business Friday, announce a detailed plan about what they are guaranteeing or not so that by Monday morning when the markets open back up folks would have had time to figure it out. It would be messy but if they do it right, hopefully the dire scenarios could be avoided. Unfortunately, the financial markets are so big and complicated nobody really has any idea what will happen.

Not just Citi. Mini-Madoff Sir Allen Stanford says: We're hiring!

Ahh, false alarm. Citi's back in the black. No problem. Phew ...

Howard Dean dares GOP to filibuster health care reform: "Be my guest and let's see how they do in 2010." That and the day's other political news in the TPMDC Morning Roundup.

From TPM Reader NM ...

Bobby Jindal is to Kenneth the Page as Michael Steele is to ... Michael Scott.

From TPM Reader RB ...

I'm glad to see TPM picking up on the question of what is to be done about the bondholders. I've had the feeling for a few weeks that this is the real Gordian knot the Administration can't bring itself to cut, for fear that the rope is holding up the roof above all of us.

Here's my next question, though: aren't most of those bondholders holding not traditional bonds - straight debt from straight borrowing at whatever interest - but derivatives of and bets on those traditional bonds? And that being so, wouldn't government, once the banks went into receivership, be able to institute rules that make holders of "real" bonds whole, and pay off the derivative gamblers at pennies on the dollar?

And if that in turn is so, doesn't every day the government fails to bite the bullet mean another bunch of billions paid back out of taxpayer funds to the derivative gamblers rather than the institutions that made good faith investments?

With all the conversations I've had today, when I get questions like this, I'm tempted to reply: "You got me. No idea." What's far more troubling to me, though, is that I talked to a few world-renowned economists today who said pretty much the same thing to me when I asked them some of these questions.

I've been increasingly mystified and frustrated, bordering on angry, over recent days as I realized that the assumption behind all the would-be financial sector fixes is that the bondholders -- i.e., the creditors of the big financial institutions, the folks who lent them money -- should take at most a nominal hit, even though they lent money to companies that in every real sense of the word went bankrupt. And the money to pay them off has to come from American taxpayers.

I was expected to hear some basic skepticism about this assumption from the economists I spoke to. But I didn't. They agreed that the danger was just too great, notwithstanding the unfairness to the taxpayer. And most of the fear stems back to what happened to the global credit markets after the collapse of Lehman Brothers last fall.

Now, as to RB's point, I think he's got a big part of the equation right. Having the bondholders take a substantial hit seems too scary to contemplate to these folks. The amount of money you'd need to make everyone whole just looks politically unfeasible. So it's very hard to know just where to go.

What it all amounts to is that the bondholders have a gun to the head of the world economy. But it's a real gun. And it may be loaded.

Who knows ...

Felix Salmon finds this little nugget in a NY Mag profile of Vikram Pandit, Citigroup CEO. It turns out that Sandy Weill, the guy who in the 1990s built Citi into the mammoth systemic risk Death Star it is today wanted the job to go to Tim Geithner.

I've speculated as to whether God created Michael Steele's tenure at the RNC simply for the purposes of cosmic comic relief, seeing as the financial crisis appears so bleak. You can see in our feature we've got this story about a bizarrely thrown together request for proposals Steele's team sent out looking for bids for rebuilding the RNC website.

He caught a lot of grief because the RFP seemed so laughably put together. But he's also drawn suspicion from a few GOP insiders who think it was thrown together so haphazardly because Steele has already decided on some friend's firm to give the contract to.

Now, normally, fun as it is chronicling the Steele/RNC trainwreck, we wouldn't waste too much ink on how they recruit their web designers. But this little wrinkle caught our attention today because, not to put too fine a point on it, Steele's got a bit of a history for running organizations that pay nice chunks of change to contractors even when it's not completely clear what work they did or whether they had the expertise or even the legal right to do it.

If I were a stakeholder in the GOP, I might be just as concerned with what's going on at headquarters as I was with what Steele was doing on TV.

Meanwhile, Sean Quinn says that Steele's fate could be sealed if the GOP gets a bad result in the special election to replace Kristen Gillibrand in New York-20 later this month.

Who's got the mystery hold on Obama's science advisors? Help us find out. Sens. Vitter and Martinez say it ain't them.

Tim Geithner is addressing the House Democratic caucus tonight about bank bailouts and sundry other financial catastrophes.

Will be very interested to hear from our House Dem Member of Congress TPM Readers about what gets said and what gets asked.

You know where to find us.

In all the debates we're having about what to do about the banks we don't seem to focus enough (at least not in the popular press) on the fact that almost all the questions come back to a single question: what to do about the bondholders. As that J.P.Morgan report we referenced this morning put it, government policy to date has largely been focused on making sure that bondholders do not lose any of their money.

So let's draw back and consider what this all means and whether it makes sense.

If you've got a big insolvent bank and you need to make up a big hole on the balance sheet you've got, broadly speaking, four groups of people you can get the money from, or put a different way, who can take the hit: shareholders, depositors, bondholders and taxpayers.

Now, for most of these banks the stock price has essentially fallen to zero. So they're pretty much already wiped out. Not much to be accomplished there, although those folks want to hold on to their equity in the hopes that they may recover on the upside. Then you have the depositors. But in FDIC insured accounts, they've got a federal guarantee up to $250,000. And presumably those with really big sums on deposit have been proactive enough to spread their money around several institutions. So not much luck there either.

Which leaves you with bondholders (the companies creditors rather owners) and taxpayers. Now, on the one hand, this sounds like a no-brainer. If you lend money to a company that goes bankrupt, that's tough luck. Maybe you recover a percentage on the dollar of what you were owed. But too bad. Why taxpayers should cover those loses is really hard to answer. But let's try it.

The counter-argument is that if bondholders, especially the most 'senior creditors', take a big hit it, will create a big shock to the financial system worldwide, making bond-investing money extremely risk-averse for a long time and making the credit markets seize up again on far worse a scale than happened last fall in the wake of the Lehman bankruptcy.

A second issue is that a lot of these bondholders are other financial institutions, so you create a cascade of failure.

(ed.note: as I spoke to economists who are extremely knowledgeable and I think not at all inclined to be carrying the water of the bondholders, what became clear to me is that it's not just a question of our having no good theory of how to unwind a crisis like this, 'we' also don't have a good handle on the facts of the situation, which makes everything much more perilous. Sort of like defusing the time bomb without having put the bomber on the rack long enough to have him tell you how it works. As one of them told me a few moments ago, the only people who really know where the bodies are buried are the folks who buried them. So as we're trying to come up with some global fix, the people who screwed everything up won't tell us where they put everything or what's connected to what.)

I come into this extremely suspicious of arguments for why taxpayers need to cover the bondholders' losses. Yes, those bonds are held by pension funds and insurance companies. In broad terms they're held by very, very wealthy people. But I've talked to different economists who I think are pretty on the level on this and they think the systemic risk is very real. And not just huge shocks to the credit markets. The losers aren't just guys in Monopoly suits who hold these bonds. It's your insurance company, your state pension fund, etc. So there's potentially a lot of collateral damage.

So where does this leave us? What's the risk of having the bondholders take a big part of the hit? A lot of it depends on whether the issue with Lehman was just letting it go under or letting it go under in a totally uncontrolled way. It seems to me that what you need is a controlled and orderly process for unwinding all of this and some equitable and reasonable system for determining who takes what hits. Then again, since I don't really know much about this how it seems to me doesn't really count for much.

Whatever else, when we talk about AIG or what to do with Citibank or Bank of America, this is the essential issue -- does the government protect the bondholders? And if we don't, is the damage so great that we're better off just covering these folks' losses? Meaning, as one of these economists I just spoke to said, at this point, in this bad a situation, stability is more important than fairness.

Saying you'll take the banks into receivership doesn't answer the question. It's a just a way of approaching it. The economists I spoke to for this both believe in nationalizing the big insolvent banks. They just also think we'll likely have to do it with blanket guarantees for their obligations -- even though it's a big giveaway to the people now holding the banks' debt.

Sen. Reid (D-NV) recommends fired Nevada US Attorney Bogden get his old job back under Obama.

Everything else is in deficit. But completely moronic questions/points from Mark Halperin remain in historic surplus. The latest is, isn't Obama distracting himself from the economic crisis by taking five minutes to sign an executive order on stem cell research?

Samuel "Joe the Plumber" Wurzelbacher denounces Michael Steele.

From last night's Kennedy Center birthday gala for Sen. Ted Kennedy (D-MA), with a surprise appearance from the President:

See more at CBSNEWS.com.

Feast your eyes on our new exclusive slideshow of all the key players in the never-ending Franken/Coleman recount trial.

I mentioned a few days ago that congressional Republicans were simply not part of the conversation on saving the American economy. The policies they're pushing don't even amount to conservative. In most cases they're pushing stuff that's just transparently ridiculous. Like a federal spending freeze in the face of massive economic downturn and possible deflationary spiral.

And now Greg Sargent has dug up a quote where a leading Republican admits that this is in fact their strategy. It's not about coming up with policies to save the country; it's all about pulling down Nancy Pelosi's and her caucus's favorability ratings.

"We will lose on legislation. But we will win the message war every day, and every week, until November 2010," said Rep. Patrick McHenry, R-N.C., an outspoken conservative who has participated on the GOP message teams. "Our goal is to bring down approval numbers for [Speaker Nancy] Pelosi and for House Democrats. That will take repetition. This is a marathon, not a sprint."

That's not really surprising. But it's a bit stunning, though perhaps also refreshing, to see them say it out loud.

Cheney consigliere David Addington having tough time finding work after the White House.

See more at CNBC.com.

Do we really have to hear lectures on deficit spending from Karl Rove?

See more at Foxnews.com.

Late Update: Rove also addressed his upcoming testimony on the politicization of the Bush Justice Department. You can watch that here.

Last night I mentioned the J.P. Morgan report referenced by the Journal, which gamed out how much longer the government would be willing and able to protect the interest of bondholders or "senior creditors" from the losses associated with failing institutions like the big banks, AIG, etc.

TPM Reader BC was kind enough to send in a copy of the report. And here's the key passage about how long the federal government will be willing to protect 'senior creditors'.

Given these developments, we turn more cautious on senior bank credit given that we see no near-term catalyst (buyer) to cause spreads to tighten. Banks are the most widely held names in the corporate bond market, given the sector's heavy issuance: nine out of the top 10 largest bond issuers are banks (see Corporates). With that in mind, despite limited non-guaranteed supply, the technicals for investors adding further exposure here are not that supportive. Furthermore, we believe the systemic risk is pervasive enough that senior bank credit spreads can widen further as worse potential outcomes are considered. In the extreme, losses can be so large that the political willpower to continue bailing out banks and insurance companies evaporates, forcing senior creditors to share in losses or producing other unorthodox outcomes.

We are still a long way from that scenario, and it is not our baseline. However, we think that in the context of massive systemic risk, the risk-reward profile in owning the senior credit is not attractive.

The takeaway is that for now and for the foreseeable future they believe that the government will continue to keep the bondholders whole and insulate them from losses associated with the financial crisis. But things could get so bad that the 'willpower' is no longer there to keep making up for the losses with taxpayer money.

Republicans are coming around to the idea that federal regulators might have to step in and shut down bad banks - even big ones - but whatever you do, do not call that "nationalization." All that and more in today's Sunday Show Roundup ...

Full-size video at TPMtv.com.

Rush Limbaugh is a ready-made villain in the latest national cable TV ad from the labor group, Americans United For Change. That and the day's other political news in the TPMDC Morning Roundup.

I do not think this issue has been raised anywhere in our news coverage or here at my blog. But I wanted to briefly enter into this debate about President Obama's decision to make Chas Freeman chair of the National Intelligence Council, a somewhat out of the way Intelligence Community panel which has the key role of overseeing the production of National Intelligence Estimates.

Indulge me for a moment for a bit of background for those not familiar with this controversy; because it's important. Freeman is firmly in the Realist school of foreign policy. He was a former Ambassador to Saudi Arabia and is close to the Saudis. The real rub, the basis of the whole controversy, however, is that he has been far more critical of Israeli policy than is generally allowed within acceptable debate in Washington. That is the crux of it. And because of that he's become the target of a spirited campaign to get his appointment rescinded.

I have no particular brief for Freeman. I've never met the man. And for what it's worth -- and it ain't worth much -- on a totally different topic he once referred to an article I wrote as "disgusting" and to me as a purveyor of "slime journalism." Basically I'd written an extremely critical article about a friend of his. So, whatever.

But the whole effort strikes me as little more than a thuggish effort to keep the already too-constricted terms of debate over the Middle East and Israel/Palestine locked down and largely one-sided. James Fallows argues here for the need for contrarian thinkers in general, of which Freeman is certainly one. Joe Klein reviews the issue here, arguing that it's not the time to be enforcing groupthink on Israel or other critical policy issues. And Andrew Sullivan has been doing great blogging on this topic in general and in this timeline in particular, which shows the whole storm being whipped up by neoconservatives upset over Freeman's positions on Israel. Finally, 17 former Ambassadors -- including Thomas Pickering -- have now come forward to support the appointment and defend Freeman's worthiness for the position if not agree with all his views.

These other posts are each worth reading because they're good and go into more detail than I am. And I could go into a deeper discussion of foreign policy questions involved. But the gist is that campaigns like this are ugly and should be resisted. Not just on general principles, but because the country needs more diversity of viewpoints on this issue right now.

WSJ, New Fears as Credit Markets Tighten Up (sub.req.)

NYT: AIG, Where Taxpayers' Dollars Go to Die

Both go to the key question how long and at what cost the federal government will continue to protect the interest of bondholders.

This was the graf that most caught my eye, which comes from the WSJ piece ...

In a report over the weekend, analysts from J.P. Morgan Chase & Co. said they had expected government intervention to help protect the interests of bondholders at financial institutions. However, they noted that "in the extreme, losses can be so large that the political willpower to continue bailing out banks and insurance companies evaporates, forcing senior creditors to share in losses or producing other unorthodox outcomes."

I'd love to see that report.

If you would like to read the maximal version of all the Republican talking points on Obama and the economy wrapped into one package, by all means read this piece on the economy by the AP's Tom Raum.

If nothing else is clear in our current crisis, it is that the only thing more bankrupt than the big banks is the debate over whether or not to nationalize them. On This Week this morning, Sen. Richard Shelby (R-AL) said he opposed nationalization but thought insolvent banks should be closed down.

Said Shelby: "I don't want to nationalize them, I think we need to close them. Close them down, get them out of business. If they're dead, they ought to be buried. We bury the small banks; we've got to bury some big ones and send a strong message to the market. And I believe that people will start investing [again] in banks."

Something like this is both heartening and insanely distressing at the same time because what exactly does he think people are talking about when people talk about nationalization? They're talking about some form of FDIC-like takeover, though probably one that would take longer and be much more complicated since you simply can't find another bank that is going to buy up most or all of Citi's assets at some knock-down price over the weekend -- certainly not in the present climate. You either clean the bank up (which would require what amounts to a de facto bankruptcy proceeding) and sell it back into private hands or break it up and sell it off in individual pieces -- likely some combination of the two.

It would be one thing if Shelby were just one more Fox News robot. But he's the ranking member of the friggin' Banking Committee.