The Truth Behind The Armchair Constitutionalists

Whenever I hear media stars like Lawrence O'Donnell and Howard Fineman pontificating over whether something is Constitutional or not, I get extremely wary, particularly considering they have spent several years arguing about detainee policy and wiretapping and torture in mostly POLITICAL terms instead of the constitutional aspects. Suddenly when Congress tries to set tax policy toward a particular class of wealthy people the media gets out their social studies texts. I imagine there can be a fair amount of reasonable argument around this, but Scott Lemieux, claims the Constitutional concerns are groundless.

Ed -- regrettably echoing the hapless Charles Krauthammer -- says that "Bills of attainder" and "ex post facto" are two phrases well-known to high school freshmen taking mandatory civics classes, so they must certainly be known to Congressmen." The ex post facto clause, however, has been held since the early 19th century to apply exclusively to criminal cases. The prohibition on bills of attainder is even less relevant; it certainly prohibits Congress from convicting AIG traders of criminal offenses without a trial, but says absolutely nothing about Congress's ability to set tax policy.

Another blogger, in addition to the clearly erroneous claims, asserts that the bill violates the equal protection clause. The obvious problem with this argument, however, is that it proves too much. The tax code discriminates in countless ways -- against renters and wage earners and in favor of homeowners and investment income earners, for example. It was been well-settled for decades that such discrimination require only some rational relationship to a legitimate government interest. The policy taxing bonuses for corporations that would have gone bankrupt without public support bears a much clearer relationship to a legitimate public objective than a law preventing anyone but an optometrist or ophthalmologist from putting lenses in glasses frames, which the Supreme Court upheld unanimously.

The debate about whether a large excise tax is good public policy ought to go forward. But let's be clear what these Constitutional questions are all about. The average salary of practically everyone you see on the teevee is well beyond the national average, and in most cases beyond the $250,000 a year cited in the House bill, and used as a dividing line in Obama's budget to reset marginal tax rates from 35% to 39%. And so, for Overton Window purposes, characterizing any effort to reduce income inequality as unconstitutional makes a whole lot of sense. Take a look at Mark Haines, CNBC's latest hero, arguing that no company can be "run well" by anyone making under $250,000 a year. Because they've been run so well by the overclass to this point.



Here's a separate interview between Haines and Rep. Brad Sherman (D-CA):

HAINES: It does not go far enough, sir?

SHERMAN: Absolutely -- it doesn't deal with the Merrill Lynch bonuses, since they were paid in December, and worse than that it doesn't deal with million-dollar-a-month salaries. More importantly, we should have AIG in receivership, they should've been put in receivership months ago, and we would have saved tens of billions of dollars. We wouldn't see tens of billions going to the richest on Wall Street, and overseas -- and of course, these bonus contracts would have been voided. We need receivership, and we need limits on salaries as well as bonuses.

HAINES: Well, receivership ... I think most people agree, that would have caused some systemic problems.

SHERMAN: Most people on Wall Street agree. But most people on Main Street do not.

HAINES: And what do the people on Main Street know about running a financial system?

SHERMAN: What do AIG executives know about running a financial system? [crosstalk] They only know how to destroy one.

HAINES: This is witch-huntery. I'll be perfectly honest with you.

SHERMAN: We don't have to hunt the witches. We know who they are.

HAINES: You and people who share your opinions seem to think, you know, let's hold salaries on Wall Street to $100,000. Do you have any idea what Wall Street would look like if you do that?

SHERMAN: Well, first of all, I wouldn't set the limit at $100,000.

HAINES: Well, whatever. $250[,000]. All the business would go -- all the business would go overseas, that's the bottom line.

SHERMAN: Obama's position is $500,000 plus unlimited restricted stock. That's where I'm at as well, although I was actually at a higher level before Obama's statement. But for you to assume that Wall Street is acting in the national interest flies in the face of recent reality.

There's a multi-pronged attack here. Congress cannot tax exorbitant bonuses of companies they bailed out because it's unconstitutional. Corporations can only be run well by the rich because greed is virtuous. Only investor participation can save the financial system, so government had better not get any ideas about capping executive compensation. And those executives must be kept happy and lavished with gifts because they are so wise in the ways of exotic financial instruments that they are the only ones who can defuse them, a fairly ridiculous idea.

Similar arguments made during the 1997 Asian financial crisis, when currencies and stock markets collapsed in much of Southeast Asia, turned out to be a smokescreen to protect the executives who were partly responsible for the mess. Recovery from that crisis required Indonesia, South Korea and Thailand to close or consolidate banks. In all three countries, bankers protested, claiming that their connections with borrowers were critical to recovery.

In South Korea, cozy relationships between banks and the large conglomerates called chaebols were a major reason for the crisis. But after the crisis hit, Korean bankers and companies insisted that the complexity of chaebols like Samsung and LG — with their many separate but interwoven businesses — meant that outsiders would not be able to distinguish good loans from bad.

In Thailand, some argued that the preponderance of family-owned businesses — and the lack of clarity about precisely which family members were really in charge — meant that only bankers already working in big institutions like Bangkok Bank and Siam Commercial Bank could determine which borrowers were creditworthy.

The leaders of Thailand and South Korea did not listen to such arguments, and thank goodness. Some of the leading Thai banks were taken over by the government. After the crisis, a civil servant in charge of one such bank noted that its bad loans were much bigger than had been indicated before the takeover, largely because of an internal coverup. Only when outsiders took over did the public discover the full scope of the losses.

We have a major inequality problem in this country. Wages for workers have stagnated while the rich grow ever richer. It is well within the public interest to address that, and because this has become so extreme as to affect consumer spending and economic activity, it's more vital now than ever. Wall Street has decoupled salary from performance and perpetuated a culture of greed in the belief that such greed made sense for the overall economy. But an oversized financial sector that produces nothing but imagined wealth actually debilitates a country. Simply put, astronomical profits from making side bets on the economy should be discouraged, making the same profits from inventiveness and innovation would be encouraged in the exchange.

If it turns out that you can make a comfortable living at zombie institutions but can’t earn big bucks there, then smart, confident, ambitious, greedy people will leave their jobs and go do other things. In a good way! Maybe they’ll start small businesses. Maybe they’ll join non-enormous, better-managed firms and help them grow and prosper. That’s the kind of thing smart, confident, ambitious, greedy people ought to be doing. Putting their talents to work in the pursuit of profitable market exchanges. Not putting their talents to work trying to run scams at taxpayer expense.

There are promising signals that the Administration is taking concerns about executive compensation seriously, although there are far better ways than having a secretive institution like the Federal Reserve "oversee" giant corporations (which they failed to do in the run-up to this crisis). Perhaps one way is to actually tie pay to performance through Silicon Valley-style compensation schemes, but the best way is through the tax code with rates at the highest marginal levels (I'd insert an additional rate above $1 million or more) that look more like the pre-Reagan era. Which is why those who wed themselves to the establishment elite get so nervous with clawback provisions like the AIG bonus tax. They don't want anyone in Washington getting any funny ideas about marginal tax rates. After all, it's unconstitutional.

Do We Have To Send You Back To The Daily Show Again?

Here's Jim Cramer building and knocking down a straw man on one of NBC's multi-platform products this morning:

I think it was a naive and misleading thing to attack the media. We weren’t behind this. CNBC, in particular, has been out front on this. … I think there are people who bear so much more responsibility [than the media] that it’s just wrong-headed: the politicians, the regulators, the SEC, the lenders, the investment banks. … It’s just a naive focus, it really is Meredith.

I like the part where Cramer says he was taking "the high road" on the interview, to Jon Stewart's face, while calling him naive when he won't be faced with a rebuttal. Quite a man.

What is misleading and fallacious is the notion that Stewart believes the media are solely responsible for the meltdown. He's a media critic, making the media his focus. But of course, everyone understands the failure of regulators and the greed of executives. That would be, um, not the point of the critique, which is that CNBC has abdicated their responsibility to the viewer to make any sense of the meltdown. And Cramer brushes aside his admission of guilt from when, um, HE was one of those traders on the other side engaging in illegal activity.

On the Monday show, The Daily Show ran a segment about short selling. That was meant to run right before Cramer's appearance (he alludes to it, but they cut it when the interview went over). The segment focused on the actual traders involved in this. It actually featured Deep Capture creator Patrick Byrne, the CEO of Overstock.com. So to say that Stewart is monomaniacally focused on the media's culpability is just wrong, and Cramer knows it.

Meanwhile, Tucker Carlson is concern trolling. Congrats, Tuckie, you got your name mentioned on the show!

Please Give Me Daily Show Airtime

It's clear that Tucker Carlson, well past his prime at the tender age of 39, was trolling for a response from Jon Stewart on Howard Kurtz' show in a desperate attempt to return to relevancy. The comments are hardly worth mentioning (I guess Tucker, who represented "the right" on Crossfire for close to a decade, doesn't consider himself partisan). But isn't the real person who should get a response to this Howard Kurtz, and his booker? How could a media criticism show possibly have someone as biased against Jon Stewart as the guy who was subject to the same kind of takedown five years ago and expect anything approaching a dispassionate analysis? To Kurtz' credit, he did play the Stewart/Carlson Crossfire clip, and asked him if it "colored" his view of the situation, but I'm wondering what value there is putting him on that show at all. He's going to lie about the interview, lie about Stewart's role, and lie about his own background. The verdict from a media standpoint is pretty clear - perhaps Carlson offers some kind of contrarian counter-perspective, but considering that he's still licking 5 year-old wounds, how is that perspective newsworthy? It's like bringing on John McCain to talk about Barack Obama... what, they do that too? Never mind.

I guess you could extrapolate that out and wonder the value in Howard Kurtz himself. However, in his print piece he at least got a statement from CNBC: "CNBC produces more than 150 hours of live television a week that includes more than 850 interviews in the service of exposing all sides of every critical financial and economic issue. We are proud of our record." They denied interview requests and refused to offer anything further. But an actual media critic would critique the media instead of giving audience to a defeated polemicist.

Rigged Game

I sincerely hope that nobody is surprised by the fact that MSNBC, which has hyped the Jon Stewart/Jim Cramer "battle royale" for over a week now, has coincidentally dropped coverage of it at precisely the moment when Stewart delivered the knockout punch and made minced meat out of Cramer, CNBC and the entire media-industrial complex:

TVNewser reports that “MSNBC producers were asked not to incorporate the Jim Cramer/Jon Stewart interview into their shows today.” By TVNewser’s count, Cramer’s Daily Show interview was only mentioned once on MSNBC today and that was during the White House press conference when a reporter asked for Obama’s reaction.

CNBC is part of a corporate entity (although, interestingly, they don't report to the news division. That corporate entity is not going to get rich by highlighting the deficiencies of certain parts of its business. Like I said earlier, it's not just CNBC. It's the entire media complex. And this indictment of their business won't be prosecuted and turned into a conviction.

James Rainey is also interesting today about CNBC and the larger implications.

The Beatdown

In case you missed it, you can catch the entire three-part interview between Jim Cramer and Jon Stewart here. I'd embed it but it's everywhere already. I think James Fallows has the right take.

Through karmic guidance, I sprang awake at the exact moment Jon Stewart was beginning his merciless demolition of interview with Jim Cramer of CNBC's "Mad Money." [...]

Although, improbably, I share a journalistic background with Cramer*, I thought Stewart, without excessive showboating, did the journalistic sensibility proud.

Just before leaving China -- ie, two days ago -- I saw with my wife the pirate-video version of Frost/Nixon, showing how difficult it is in real time to ask the kind of questions Stewart did. I know, Frost was dealing with a former president. Still, it couldn't have been easy to do what Stewart just did. Seeing this interview justified the three-day trip in itself.

The post is entitled "It's true: Jon Stewart has become Edward R. Murrow".

I don't know what to say beyond what's already been said. Stewart is seemingly the only guy left in America willing to call out the media who has the platform to do it to their face. Jim Cramer is a criminal walking free and I don't use that term lightly. He has practically admitted to crimes, and Stewart played some of them last night. But it's not just CNBC. It's the entire media complex. What is said on television or in print is such a small part of the story, and what is concealed is so often more vital for a well-informed citizenry than what is revealed. How is what CNBC has done any different from the cheerleading into war in Iraq?

I'd like to think that this is a moment for change, but Jon Stewart is a comedian on a comedy show, and he's well aware of that, even though he's the only guy in the business with the platform. There will be a backlash against him, and it's already starting to happen. He can take it and give back plenty. But ultimately, the system remains. And this indictment won't be picked up as a conviction. Because the entire media is corroded.

Must-See TV

Don't miss Jim Cramer on The Daily Show tonight, the culmination of a week-long feud. Initially, I didn't think Jon Stewart will actually make Cramer REALLY uncomfortable, like by bringing up Deep Capture or his admission that he manipulated the markets as a hedge fund trader, but apparently that video is played, and the interview is good. For his part, Cramer tried to talk everything down this morning.

The CNBC star, apparently trying to soften his image, went on “The Martha Stewart Show” this morning and admitted that Stewart has gotten the better of him so far. “My kids only know I have a show ‘cause Jon Stewart’s been skewering me,” the "Mad Money" host said.

Cramer's never hesitated to show emotion before, but on Thursday, he showed a new, vulnerable side. "I’m a little nervous. How bad is it gonna be? Is he gonna kill me?” Cramer said. “You should be nervous,” (Martha) Stewart said. "He’s fast as lightning!”

“I’m not, I’m slow as molasses,” Cramer replied. Considering that the entire conceit of “Mad Money” is that Cramer is manic -- “mad,” if you will -- this new, self-deprecating incarnation of the man seems pretty implausible.

So I'm guessing Cramer will sit there and say he's sorry a lot, and Stewart will tear CNBC a new one, and they'll agree to disagree.

Is that an exciting preview or what?

Not A Fair Fight

I don't know what Jim Cramer thinks he's accomplishing by taking potshots at Jon Stewart. It's not that he's "punching down," which is just something you never do, it's that you're serving up hours of material for a well-trained group of comic writers just begging to make you look like a schmuck. And impugning Stewart's character, saying that he doesn't have the "guts" to pick stocks or make transcripts of his show (like The Daily Show airs in secret) misses the point entirely. This isn't a winnable fight.

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Then again, this could be an elaborate setup for Cramer's appearance on The Daily Show Thursday night. Hopefully he'll ask about Deep Capture.

Media-Financial Complex

CNBC decided to respond to the righteous Jon Stewart rant against them on a Friday so he couldn't talk about it on that night's show. Their claim is that Stewart is "bizarrely obsessed" with their network, and Stewart was repeatedly calling Rick Santelli to come on the show. That's, um, called BOOKING A GUEST. Maybe CNBC doesn't do much of that, they just have a "CEO room" in Manhattan and just put the camera on whoever shows up there. It's not like they ask much of a variance of questions: "How great is your company doing? Is it awesome to be rich?"

Meanwhile, the network and other right-wing market populists continue to push the idea that Obama is responsible for the Dow's fall since Inauguration Day. I guess the business climate and the job loss has nothing to do with it.

The argument that Obama is somehow responsible for the collapse of Wall Street is absurd. First, every major policy that led to this collapse occurred under George W.'s watch (or, more accurately, his failure to watch). The housing and financial bubbles were created under Bush and exploded under Bush. The stock market began to collapse under Bush.

Second, it's inevitable that stocks, led by the bloated financial sector, would lose their remaining hot air as the new administration begins "stress-testing" the big banks, many of which are technically insolvent. After all, their share prices were built on a tissue of lies and dreams. Other sectors whose values were similarly distorted and distended by years of financial deception and regulatory disregard, such as housing and insurance, will also have to return to the real world before they can recover. Which could mean more stock losses.

Finally, none of the financial wizards who are now charging Obama with leading America into the abyss have offered an alternative plan for getting us out of the mess that, not incidentally, many of these same wizards happily led us into. For years, the Wall Street Journal editorial page and the financial gurus of cable news cheered as Wall Street leveraged its way into oblivion.

Obviously, Wall Street rage is aimed at getting the biggest banks paid off and the shareholders made whole so that only taxpayers will bear the burden of the collapse. There may be a very good reason, however, for outlets like CNBC, in particular Jim Cramer, to claim that Obama is responsible for the fall of the market. It deflects the blame from themselves. The story of Deep Capture is epic and needs to be read in full by the investigators who followed it for years to really understand. But TocqueDeville at Daily Kos does a pretty decent summarizing job.

This rabbit hole involves the thugs surrounding Jim Cramer and some of the top financial "journalists" from the New York Times, WSJ, Fortune magazine and BusinessWeek, top hedge funds, the Mafia, and the DTCC. It also includes "blackmail, smear campaigns, espionage, fraud, harassment, extortion, bribery, rumor-mongering, sabotage, off-shore money laundering, political cronyism, frivolous lawsuits, witness tampering, biased financial research, false identities, bogus credit ratings, bribery, libelous blogs, bad science, forgery, wiretapping, counterfeiting, collusion, lying, cheating, threats and theft."

And if that wasn't fun enough, it may be the underlying story of what collapsed the entire, global banking system or at least served as the catalyst for the collapse.

We're talking about financial journalists using the power of their megaphone to trash a stock, or even tout it at the last minute, and then, through naked short-selling, earn millions while destroying public companies. And Jim Cramer is perhaps the greatest offender.

I have analyzed well over a thousand stories written by this clique of journalists. The vast majority of them were sourced from a small group of short-sellers who are also friends of Cramer. Other popular sources for this group of journalists include convicted felons, mobsters, dubious private investigators, crooked lawyers, hired stock bashers, and gun-toting goons - most of whom are tied to the Cramer constellation of short-sellers.

Some of the stories written by these reporters are accurate enough. But many are not. The journalists misconstrue data with seemingly purposeful intent. They exaggerate and obfuscate. They publish innuendo or merely repeat, Deus Optimus Maximus, the words of their hedge fund and criminal friends. A single negative story by one of these reporter-thugs can send a company’s stock tumbling by more than 50% — pure profit for their hedge fund sources, who of course sell the company short (often right before the articles are published). Meanwhile, an overwhelming majority of the companies targeted by these journalists will also be the victims of phantom stock selling and other shenanigans. The journalists do not mention this in their stories, and in fact go out of their way to deny that phantom stock exists.

Anyone who says otherwise is subjected to a vicious media smear.

It doesn't take much these days to persuade you that anyone on Wall Street is a crook. But Mark Mitchell had the goods. Cramer understood the value of information, like any inside trader. Then he got the power, through his own TV show, to control that information. And the method that Cramer and his cronies apparently preferred, naked short-selling, has been brought up as a possible culprit in the fall of Bear Stearns. Sen. Jon Tester even brought it up in a hearing with then-SEC chair Christopher Cox in April 2008.

This financial meltdown isn't entirely due to the people who made money on the way down. But the corroded relationship between the Masters of the Universe and the subjects who cover them - the Media-Financial Complex - is absolutely a part of this tale. And the phantom stock - invented wealth that can appear and disappear - is just another of the exotic financial instruments created by people who push paper and add zeroes to their balance sheets and call it work, paper and securities that are then leveraged and bet upon and sliced and diced until nobody understands them and just doesn't want to get left holding them when the organ stops playing and the big dance ends.

Read the story of Deep Capture. It's a through-the-looking-glass experience. Anyway, I can think of a guest for Stewart's next show...

Our Best Defense

At times like these, you can do nothing but laugh. And when you're done with that, you can laugh at CNBC, which has taken a major hit during this financial crisis, exposed as they are to be a cheap fraud.

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CNBC has no response because they couldn't possibly have a response. There's nothing that can be said. They are a network dedicated to offering zillionaire CEOs a platform to lie, and spinning pro-business and anti-worker policies as good for America. That's what they do, that's all they do. And when a crisis hits, they look foolish.



I actually thought the best takedown of them all was Stephen Colbert inviting Jim Cramer on The Colbert Report and then playing pictures of cute kittens and puppies behind whatever he said. That's basically CNBC in a nutshell leading up to this crisis, when Bush was still in office. They've only done a 180 now and gone market populist because they think they're protecting their bottom lines. CNBC is a farce, and Colbert basically proved it last night.