Pajamas Media: Entitled To Its Opinion, Not Its Own FACTS


Oh my…. it seems that Tom over at Pajamas Media doesn’t like me very much.

To start…

What I wrote is my interpretation of what happened in that room, based on what CNBC, the New York Times, to a lesser extent the Associated Press (which watered it down to, “Paulson basically told the bank CEOs that they had to accept the government stock purchases for the good of the U.S. economy”), and precious few others reported. The Times even described Godfather Paulson’s “proposal” as “an offer the banks could not refuse.” My interpretation based on what is known sure as hell isn’t “utter falsehood.”

Ok, so if you had that threat made to you, would you look like this coming out of the room?

Sure looks like they were threatened to me!  All chuckles and smiles is perfectly congruent with being threatened by the Treasury Secretary, right?  NOT!

Please remember that I reported on this at the time and in fact won a Reed Irvine Award for my coverage of the events that unfolded during those months!

Indeed, this is what I wrote at the time of the event:

Do they look upset with the terms of the deal they were “forced” to take?  Or do they look like they just screwed you out of $250 billion dollars and are laughing all the way back to Wall Street?

You have given up your right to object America, because you are not objecting now.  You are not in the streets.  You are not in DC.  You are not raising hell with your elected representatives and the un-elected, appointed smiling faces who just looted you once again, this time to the tune of a quarter of a trillion dollars.

Now sure, the media “spin” was exactly what you stated, but unfortunately that photo was published with one of the stories.  Gee, the press never lies does it, such as, for example, the claim by the Times that OWS has issued a “list of demands” (including one for a $20/hour wage irrespective of whether you work or not) that had been disavowed as never taken up or passed by the OWS crowd several day previous!  How do I know the Times lied?  I’m on the CC list for the OWS folks and this was discussed a number of days ago by them – that was one person’s opinion and was not taken up, agreed to or “passed” (yes, they vote down there) by OWS.

You now admit that your writing was your interpretation.  But that’s not how it was originally presented.  You presented it as fact, not interpretation made three years later when others were reporting on it at the time of the event.

In point of fact you went further than simply to state your opinion (that Bush “took over” the banking system by force) as fact: YOU USED QUOTATION MARKS!

Quotation marks are a literary device that denotes a factual quotation – someone’s actual speech.  Perhaps in the world of new media people like to play fast and loose with the English language, but as I have often observed words mean things.  A quote is a quote is a quote.  Now you claim this was an interpretation which is an admission that the original was not a quote.

My interpretation based on what is known sure as hell isn’t “utter falsehood.”

Your presentation of a quotation that was not in fact a quotation is an “utter falsehood”, unless of course you have an actual, attributable source for those exact words — which you admit you don’t as you “interpreted” them based on other press reports (that are reasonably rebutted and thus subject to question by the photographic evidence.)  Neither you or I was in that room but I’ve never seen someone get threatened in the manner you portrayed and yuck it up minutes later while walking out of the building.

Again, your “quote” that was not a quote:

“You really have a nice bank there. But if you walk out without signing this document, right here, right now, we will bring all of the regulatory and law-enforcement powers of the United States government to bear on your institution. Your depositors and shareholders will suffer immensely. Your bank won’t survive. It would really be a shame if that were to happen. But we promise you, it will.”

Words have meanings.  Quotation marks around a set of words identify those words as spoken by a person.  You’ve admitted you interpreted those words — that is, you invented them predicated on what you think happened in that room and based on various other sources.

The fact of the matter is that the banks were not “screwed” by the government – the American people were in fact looted by the government and the money was given to the banks.  Or if you prefer in a shorter and more-direct form of language, they robbed you using the government, the government did not rob them.  Oh yes, Fascism was imposed that day, but not in the way that you interpreted it.  “Free market capitalism” in the form of those banks didn’t exist at that moment in time – they were bankrupt.  Done.  Kaput.  They owed far more than they had in credit instruments and blown up loans.  The bad news is that the underlying rot never got fixed – Kanjorski basically extorted FASB months later in 2009 and as a consequence the banks still have a bunch of crap on their balance sheets and who knows what any of its worth?

I’d stop here but unfortunately one of your very own sources impeached your “interpretation” in the actual article you cited as your inspiration, and the people should know this.

Indeed, the very NY Times article you cite says this further down the page, which you didn’t bother “interpreting” with your “quote” that wasn’t a quote:

As they heard more of the details, some of the bankers began to realize how attractive the program was for them.

Even as they insisted that they did not need the money, bankers recognized that the extra capital could be helpful if the economy became shakier. Besides, many of these banks’ biggest businesses are tied to the stock and credit markets; the quicker they improve, the better their results.

Later, Mr. Pandit told colleagues that the investment would give Citigroup more flexibility to borrow and lend. Mr. Dimon told colleagues he believed the relatively cheap capital was a fair deal for his bank. Mr. Lewis said he recognized the prospects of his bank were closely aligned with the American economy.

Mr. Thain was intrigued by the terms of the guarantee by the Federal Deposit Insurance Corporation on new senior debt issued by banks, participants said. He mentally calculated the maturities on debt issued by Merrill Lynch, to determine how the program could benefit his bank.

Wait a second!  You told everyone that these banks were effectively seized!  That they were forced to take that money and didn’t want it.  They saw no net benefit, according to you. Yet the picture says the bankers were happy when they left the Treasury, and by God, there it is in the NY Times – they didn’t exactly hate the deal, did they?  Thain thought the FDIC guarantee was attractive.  Dimon thought the deal was FAIR.  Even Lewis wasn’t pissed off.  Why golly gee, perhaps that picture accurately portrayed their view after they realized they were ripping off the American public with the full complicity and assistance of the Government instead of getting screwed themselves!

But that is NOT the story line you sold in your article is it?

It sure was, however, the one I reported back in 2008.

And by God your own source contains the reference material to back my view and debunk yours!

We’ll continue.

Again, if there’s evidence that all the banks willingly jumped up and said okey-dokey without coercion, I’d like to see it. Otherwise, what I wrote is an opinion based on the clearly understood difference between a willing seller-willing buyer transaction and one based on implicit and explicit threats.

See the picture up above?  Do those men look happy or do they look like they were just extorted out of their free-market bank?  Or read my Ticker that I linked up above – I wrote it at the time of the meeting.  Or, for that matter, read your own NY Times source piece!

The next paragraph is clearly an expressed opinion. As much as Karl may not like it, I’m entitled to it, and it sure as hell has no “utter falsehood” component:

The economy as we knew it died that day — and virtually no one objected. As Michelle Malkin wrote: “If you don’t feel like throwing up today, you’re not paying attention.”

Of course you’re entitled to your opinion.  You’re not, however, entitled to your own facts.  And my point on the facts and my calling you out on same was related to your quotation that you now admit never was actually spoken by Paulson or anyone else – you inferred it, but didn’t identify your “quote” as an inference or cite sources from which you drew that inference at the time.  The reason I called you out was that I had never seen that “quote” before, so I searched for it – and couldn’t find it, except in your article, strongly implying that it was crap.  Then I went back and reviewed my own journalism from the time, just to make sure I remembered correctly what I wrote about three years ago.

But even if you had cited sources (and you did in your follow-up objection) it doesn’t change a thing when it comes to putting quote marks around your own opinions, unless of course you identify them as your spoken opinion, which you did not.  Never mind that one of your very own source articles that you cite refutes your claim, at least in part beyond any reasonable doubt (I’d argue it’s entirely refuted, but that’s my interpretation which probably differs from yours.)

Incidentally, since we’re on facts, let’s do a few more, because you jumped all over me based on the fact that you appear to have invented a quote that was never spoken and I caught you doing it.  But that’s not where the substance of my issue with your original article lies.  No, it’s the premise of the article — that “big Daddy Government” is why our economy is utterly screwed that I was attacking — that’s the factual fallacy that I assert you attempted to run.

Since we’re hashing it out here, I’ll keep going and repeat what I said before along with more detail in the hopes that you’ll actually bother to read it this time.

The fact that the large majority of TARP funding has been repaid

It has eh?  You sure about that?  While we’re at it would you please define “large majority” for me? You should look closely at Fannie, Freddie and (especially) AIG and the shell games that were played to shuffle things around.  This too is a common political narrative and it is also false.  A huge amount of TARP money is still outstanding and will never be paid back as it was effectively laundered.

You, I and the rest of the taxpayers ate that – it wound up in the deficit, effectively shifting that borrowing to the federal government.

This sort of shell game is all too common in the federal government and I excuse you for not understanding it or catching it at the time (or since.)  It really is somewhat difficult to figure out, especially when the current Administration parrots almost on a weekly basis that “TARP was repaid.”  Given that you report on political events I’d expect you to be more skeptical, but I’ll give you a pass on that as quite frankly a whole lot of the media can’t figure it out either and it does take both digging and discernment as to exactly how it happened.

The final paragraph with which Denninger takes issue is also the column’s finale:

Even beyond what we can see with regulations gone wild, failed stimulus, and outright corruption, our government’s authoritarian overhang and its destructive psychological effect on business and investor behavior largely explain why the economy won’t acceptably grow.

Denninger wrathfully writes: “If you believe one word of that paragraph you’re dumber than a box of rocks.”

Rock on this, Karl: It sure as hell isn’t an “utter falsehood” — and for heaven’s sake, please note that in my view the government influences cited “largely explain” why the economy won’t grow — not by any stretch exclusively, or even nearly exclusively.

That’s right, I take issue with it because I assert that it’s not true.  And I stand by what I said: If you believe one word of that you’re dumber than a box of rocks.

Quite simply, you’re wrong about why the economy won’t grow acceptably. The reason the economy will not grow acceptably is because it didn’t for a full 30 years and the scam that was run to make it look like it did ran out of the ability to sustain the pyramid that had been built.

Like all pyramid schemes this one failed when last sucker was consumed by his folly.

The facts are found in this chart that I produced in my previous article, with both data sources taken from the Government itself.  The Fed Z1 and the BEA GDP series – go grab ’em yourself and get to work with Excel.  I do not expect you, or anyone else, to take my word for it that this chart actually represents reality – in fact I expect you to verify or refute my work with your own, as that is the only way that you will ever trust what someone says – when you know what you’re looking at is true because you checked it yourself.

What you are looking at is a quarterly plot of the increase (or decrease) in GDP and debt – the three-month change in billions of dollars from one quarter to the next, from 1980 to the first part of 2011.

From 1980 until the collapse – in fact, until 2009 – there was not one three month period where the economy expanded in output faster than debt expanded.  That is, there was no actual economic growth funded by output improvement, from productivity or otherwise, not even for ONE three month period – it was all funded by ever-increasing borrowing.

But borrowed money has to be paid back eventually, all borrowing comes with interest due and no matter who you are a time comes when you must stop adding additional borrowing (in which case the economy crashes) or you can’t pay the principal or interest (in which case the economy crashes.)

We hit that wall in 2007. 

That is the reason the economy blew up.

The crash itself produced a short-term dislocation in debt (due to defaults) that temporarily gave us about a year worth of positive ratio on these figures.  We are now, however, back to our sinning ways. 

Incidentally, the Fed Z1 is the authoritative data on all debt through the economy.  Households, mortgages, non-profits, corporate debt, bank (financial products) debt, state, local, federal, etc.  It excludes only Social Security and Medicare (the “trust funds”) as those are not legally debts.  It therefore slightly understates the total debt, but not by much (about 10% at present.)

The BEA GDP series is the authoritative source on the gross domestic product of all goods and services in the United States.

The reason the economy “is not growing acceptably now” is not because of our government’s “authoritarian overhang.”

Please don’t misunderstand me – that “authoritarian overhang” is bad, and it should go away.  But it is not why the economy hit the wall in 2007 and it is not why it is failing to grow acceptably now.

The economy hit the wall in 2007 because we — our government and the banks, along with the Fed — ran an intentional ponzi scheme that ultimately reached borrowing six new dollars for every one new dollar of GDP.  The mathematical limits of debt service were reached in the private economy and the schemes and frauds run not by government but primarily by private parties, with the government intentionally averting its eyes ran out of suckers who were willing and able to perpetuate the pyramid.

If you want to know why students are in the streets at OWS and elsewhere, there’s your reason by the way – we are screwing them now as they’re the last people we can screw – everyone else is tapped out!

This, incidentally, is why we then ran between 10-12% of GDP in Federal deficits – the Federal Government attempted to cover up the collapse of the pyramid.

We are not growing the economy now because we did not clear this debt that cannot be paid as agreed from the economy, as this chart clearly shows:

THAT is why the economy is not growing Tom.

The reason I went after you in my column is that this sort of right-wing tripe is just that – tripe.  It’s mathematically bankrupt, it’s factually wrong, and “correcting” what you perceive as the “cause” will do nothing because you (along with a lot of other people) have misdiagnosed the problem.  You’re trying to turn a math problem into a political one and score political points instead of addressing the actual cause of our economic malaise.  At the same time you’re ignoring the fact that we replaced fully 12% of our GDP (which is supposed to be private demand) with borrowed Federal government debt.  The ability to do that will eventually end too, and if we don’t stop it voluntarily first our political system will collapse.  Nobody with one bit of intelligence wants to see that happen, and for that reason and my assumption that you are intelligent (if perhaps a bit misguided) you should engage me and anyone else willing to have an honest discussion of the issues at hand so as to attempt to raise public awareness and put a stop to this before it blows up in our faces.

The root problem lies in the fundamental nature of exponents.  I have been harping on this for years, but nobody wants to hear it, despite the fact that the data is clear, it is what it is, and the arithmetic involved is literally middle-school material.

Mathematical relationships are not suggestions and they do not bend to political whim and will.  They are laws that unlike the laws of man you cannot violate – 2 + 2 will always equal 4, and at a 10% claimed house price growth rate a $150,000 house will, in each and every case, have a “value” of over $2 million dollars 30 years hence.

The problem is that the “middle class” $150,000 house can’t be bought in 30 years by anyone in the middle class, as none of those people will have the $2 million required.

Likewise a 9% growth rate of medical expenses turns a $600 a month health policy for a 50 year old person into more than $12,000 a month in cost 35 years hence.  That’s almost $150,000 a year.  Is there any possible way to cover that?  No, but that’s what you’re being sold when you are told that “nobody over 50 will have their Medicare tampered with”, and incidentally, that $150k is what the 15 year old today will be expected to pay annually when they are 50.  Even with a 3% annual raise (“inflation”) every year from 15 to 50, never a recession, never a job loss that involves a pay cut, never anything bad happening that impairs income the cost will exceed the median gross income by a solid margin.

It’s a LIE Tom.  What’s being put forward is mathematically impossible just as it was in the 2000s with housing and in the 1990s with Internet companies.  All of it was and still is impossible as a matter of mathematics and the people running these schemes know it.

There is not a thing you can do about this Tom – nor can anyone else in the country and indeed the world – other than accept it.   We must confront and accept what happened and deal with the adjustments that we must make in our economy.  They’re not going to be fun but they also cannot be avoided and the longer we wait the worse the pain is going to be.  The damage is progressive and exponential in nature.  The evidence lay before us for a literal 30 years and we refused to deal with it.  Please be aware that when you’re dealing with an exponential event like this when only the last “doubling” remains you still have half your capacity remaining.  Everything seems fine, right?

Nope – you’re on the brink of utter disaster.

The option to play this game has expired and it is time to face the truth.

I will close with a response to this:

Karl Denninger owes us — myself and Pajamas Media — nothing short of an unconditional apology. The proper words are: “I was wrong. I am sorry. I will appropriately retract.” Period. From my standpoint, there’s no chance of any kind of dialog about the rest of the content at your post — which might otherwise be quite worthy of discussion — until I get one.

You’re entitled to your opinions, whatever they may be.  You’re not entitled to invent facts, and placing words inside quotation marks that claim to make a point that you in fact interpreted might have occurred from other sources without identifying them as your own belief as opposed to someone else’s actual words you are quoting falls into that category.

As for your opinion that the banks were “taken over”, I disagree.  I argue that the banks in fact looted the people with the full cooperation and complicity of the Treasury, and my interpretation is backed by the actual words of the bill that were passed and how it was used, buttressed by the fact that Kashkari testified over a year later under oath that prior to final passage of TARP Paulson had already decided to inject capital into the banks and did not inform Congress of this change in the essential intent of the bill on the floor at the time.   (CSPAN should still have archives of that testimony if you’re interested in it.)  It is further buttressed by your own claimed source.

I was attempting to engage in a debate on the substance of the matter, which is the root of your claim rather than the minutia: You stated that our economy in large part is not growing because our government has basically taken it over via authoritarian acts, implying that were those acts to be reversed we’d be ok (or at least “better off.”)

You’re wrong.

We’re in this mess because for 30 years our government, the banks, The Fed and others in our economy who knew the truth about what they were doing lied.  We collectively as Americans refused to question their claims and look at the fundamental mathematical relationships involved despite having the data available to us published by the very people who were doing the lying.  We refused to validate what we were being told and discover those lies and then hold the liars to account.  Those who warned of these lies, including but not limited to Brooksley Born, Ross Perot and others, myself included (dating back to the 1990s and then again from 07 forward) have been ignored.  Some of them, like Brooksley Born, were literally run out of town on a rail.

Now the chickens have come home to roost and the reality is staring us in the face.  We do no good and much bad by playing make-believe.  There is simply no more time for these sorts of political games.  The problems facing our economy cannot be solved without accepting what has happened and what must occur to clear the overhang we have created.  This will not be a painless process but there are things we can do to mitigate the damage, or at least make the adjustment somewhat easier.

If we refuse to have that debate, and instead continue to misdiagnose the problem by willful and intentional blindness then the mathematics will continue onward as they have thus far.  We are literally a minute or two from midnight, and time is running out to take steps to mitigate what is coming.

This is not my opinion, it is mathematical fact, whether you or anyone else cares to admit it or not.

That is why I wrote my article in response to your first post, and why I penned this one as well.

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